Why Teenagers Need To Be Financially Savvy

In today's economy, Gen Z needs to know a lot about being financially savvy. Student debt, housing prices, inflation, and low wages are all factors working against us. But are these really causes for concern if every generation has to experience them? Yes! And in this blog post, I’ll tell you why.

Student Debt

Gen Z students are facing an uphill battle when it comes to student debt. Just today, the Supreme Court struck down President Biden's student debt forgiveness plan. This could have been a game changer for struggling students, but it’s no longer on the table. Tuition prices are constantly going up. Costs are especially high for students going to schools that are not in their state or country. According to Deloitte’s 2022 Gen Z and Milennial Survey, the average Gen Z college graduate has around $41,000 of student loan debt. With each generation, this number increases. St. Louis Fed states that Gen Z has 13% more, on average, student loan debt than Millennials did.

Although most universities offer financial aid for applicants in difficult financial situations, they are not able to do this for every student. Most students will spend decades paying off this debt, which is likely not an easy feat when Gen Z also struggles with other financial issues I will discuss in this post. Many students fresh out of college struggle to make enough money to support themselves, let alone pay off these huge numbers. “Over a third (36%) of older Gen Zers had student debt as of June 2022.” (New York Fed and Equifax’s Consumer Credit Panel) That is a huge percentage of young people struggling with large sums of debt.

Student debt is a serious issue that is unavoidable for most students, but a good financial plan can help graduates seeking to pay off their debt as quickly as possible.

Housing Prices

The rising housing prices, along with gas prices, are a hot topic among people of all ages at the moment. However, it is the young adults of Gen Z who are struggling the most because of these costs. In fact, the “cost of living (meaning housing, transport and bills) was the top worry cited by Gen Z (29%)”. (Forbes, 2023)

According to Forbes, each generation since the Silent Generation has had slightly fewer homeowners than the last. A vast majority of adults in older generations owned homes but that number has decreased to about 51%. Gen Z was predicted to be the generation to defy these statistics, but in this economy this will be difficult. If anything, Gen Zers might be closer to deciding that owning a home in their 20’s is not so important. In fact,“54% of Gen Zers ages 18-25 are living with their folks,” and 80% of respondents said they are not optimistic about what the state of the economy will be in the next few years. Some think that it may even get worse. (Forbes, 2023)

Finding a home right away might not be on every Gen Zers mind, but these prices may continue to rise by the time it is. Being financially smart will be a huge help when it comes time to buy a home.

Inflation

Inflation is another worrying problem for Gen Zers aged 18-25. Inflation is the increase of prices over time. Since the pandemic started, prices have gone up more quickly and “with inflation hovering around 8% and remaining near a four-decade high for months, the data indicates Gen Zers are concerned about their current and future financial security.” (Fox Business) Inflation makes it difficult to afford the bare necessities like food and gas. Paired with the issue of Gen Z earning low wages, it becomes a real problem. In a survey for young adults, “28% of respondents said they are typically able to pay all their bills on time, and 41% said they are worried that paying their bills will become even more difficult over the next 12 months due to high inflation.” (Fox Business)

Inflation is not something everyday people can control, but it is important that we take steps to mitigate its effects. This means budgeting, saving money, and investing in assets that inflation can’t affect as much.

Low wages

Low wages are a cause for concern for young adults in this economy. In fact, Forbes found that “43% of Gen Z workers have taken on either a part- or full-time job in addition to their primary job.” Us Gen Zers, including many who are still in high school, are taking on more than one job to support themselves.

Some people also turn towards side hustles to resolve this issue. There are many to choose from, like delivering food, thrifting clothes to sell online, or even becoming an influencer. While Gen Z does not lack creativity in finding ways to make extra money, most people agree that they should be able to get by with one salary. The rising cost of living and the student debt loans that Gen Zers still have to pay off are making this impossible for many and “only a quarter of Gen Z report that they can comfortably cover their monthly living expenses” (Forbes) For now, a helpful thing to do could be to find a way to monetize the skills they have if their main source of income is not sufficient.

Student debt, housing prices, inflation, and low wages are issues affecting Gen Zers more than any other generation. Making a good financial plan for the future is key to dealing with these issues. Lucky for us, we have access to so many resources that can help. While we can’t control the prices rising, we can take steps to reduce their impact on us.

Works Cited

Perna, M. C. (2022, May 24). Deloitte: Almost half of gen Z workers live with financial anxiety every day. Forbes. https://www.forbes.com/sites/markcperna/2022/05/23/deloitte-almost-half-of-gen-z-workers-live-with-financial-anxiety-every-day/

Kent, A. H., & Ricketts, L. R. (2023, March 5). How does gen Z student debt compare with millennials’? Saint Louis Fed Eagle. https://www.stlouisfed.org/on-the-economy/2022/aug/how-does-gen-z-student-debt-compare-millennials

Yahoo! (n.d.). The future of homebuying: Does gen Z have it even tougher than millennials?. Yahoo! Finance. https://finance.yahoo.com/news/future-homebuying-does-gen-z-201732049.html

Dumas, B. (2022, November 14). Inflation driving more than half of gen Z to live with their parents. Fox Business. https://www.foxbusiness.com/economy/inflation-driving-more-than-half-gen-z-live-parents