close
close

Nearly half of Generation Z gets help from mom and dad’s bank, report says – NBC 6 South Florida

Nearly half of Generation Z gets help from mom and dad’s bank, report says – NBC 6 South Florida
Nearly half of Generation Z gets help from mom and dad’s bank, report says – NBC 6 South Florida

  • According to a new report from Bank of America, 46% of Generation Z now rely on family for financial support.
  • This is mainly due to the recent surge in inflation as well as specific challenges related to housing costs and the affordability of university tuition fees.

In order to cover the high cost of living, many young adults turn to a possible safety net: their parents.

Nearly half (46%) of Generation Z ages 18 to 27 rely on family for financial support, according to a new report from Bank of America.

Even more (52%) said they did not earn enough money to live their dream life and cited daily expenses as the biggest obstacle to their financial success.

“The high cost of living is certainly impacting Generation Z,” said Holly O’Neill, president of retail banking at Bank of America.

The financial institution surveyed more than 1,000 Generation Z adults in April and May.

Why times are so hard for Generation Z

Many consumers feel burdened by higher prices – especially for food, gasoline and housing. However, those just starting out in the workforce face additional financial challenges.

Not only are their wages lower, adjusted for inflation, than their parents’ incomes in their twenties and thirties, they also have higher student loan payments.

Even compared to Millennials, Generation Z members spend significantly more on essentials than young adults did a decade ago, other reports show.

And they have the debt to prove it. About 15 percent of Gen Z members have maxed out their credit card credit and are at risk of defaulting on their payments — more than any other generation, the New York Fed reported in May.

“Crime rates show that stress is increasing in some parts of the population,” researchers at the New York Fed explained at the time.

“The high housing costs are definitely an obstacle”

In the years since the Covid pandemic, owning a home has been one of the most important tools for wealth creation – and those who could no longer afford the housing market have had disproportionately greater difficulty achieving the same level of financial security, says Brett House, an economics professor at Columbia Business School.

“This is a huge challenge for Generation Z’s wealth creation,” he said.

More from Personal Finance:
Inflation causes financial stress
This “bucket strategy” could lower your taxes in retirement
More and more Americans are having problems, even as inflation slows

After food and groceries, housing is now the second most important expense that most young adults need assistance with, Bank of America also found.

“The high cost of housing is definitely a barrier for them,” O’Neill said. “We also found that the majority of Generation Z are not paying for their own housing.”

Experts recommend spending no more than 30 percent of your net income on housing. However, many young adults who cover their own expenses spend significantly more. Two-thirds of those surveyed by Bank of America said they spend more than 30 percent of their salary on housing, and almost a quarter even spent more than 50 percent.

O’Neill advises her own Generation Z children to follow the 50-30-20 rule, which recommends spending 50 percent of your salary on necessities like food, housing and transportation, 30 percent on discretionary expenses, and putting the remaining 20 percent aside.

Fewer Americans feel financially comfortable overall

But Generation Z isn’t the only one struggling. Most Americans believe they don’t earn enough today to live the life they want.

Only 25% of all adults said they were fully financially secure (compared to 28% in 2023), according to a separate report from Bankrate.

As for their salary, Americans said they needed to make an average of $186,000 to live comfortably, Bankrate found. But to feel rich, they would need to earn just over half a million dollars a year, or $520,000.

Similarly, recent inflation and specific challenges related to housing costs and college affordability have posed significant obstacles to achieving financial security, according to Bankrate.

“Many Americans are stuck somewhere between the ongoing shock of rising prices, a lack of income growth and a feeling that their hopes and dreams are out of sync with their financial capabilities,” said Mark Hamrick, senior economic analyst at Bankrate.

Subscribe to CNBC on YouTube.

Leave a Reply

Your email address will not be published. Required fields are marked *