Why are Gen Z and Millennials So Broke? Here's How to Break The Cycle
If you were born between 1981-1996 or 1997-2012, you are part of the Millennial and Gen Z generations. As part of it, people constantly talk about how you adapted to the latest technology. You might have even helped your parents, grandparents, or other older relatives with their cell phones.
And you might have also heard conversations about your financial situation. 🤨
When discussing Millennials and Gen Zers, money is always the most prominent topic. Why? While Gen Z and Millennials excel at navigating the digital landscape, they face significant financial struggles. Plus, their incomes have fallen due to recent global events.
If you're wondering why everyone else seems so worried about you, or if you relate to these situations we've exposed, let's examine the facts to understand why Gen Z and Millennials are "broke," and let's explore targeted solutions that could break the cycle of financial struggle.
The Generational Financial Gap
Many baby boomers and Gen Xers criticize Millennials and Gen Z for not achieving milestones such as marriage, property ownership, and saving big amounts of money. But most baby boomers and Gen X need to understand that these achievements might have been easier to accomplish in their youth and that Gen Z and Millennials face radically different economic realities.
While many baby boomers and Gen Xers experienced lower education costs and a more favorable job market that allowed them to secure stable employment and build substantial savings over time, Millennials and Gen Zers are having a harder time making ends meet.
Business Insider reports that college tuition has more than doubled since the 1980s. At $29,800, the average student debt per graduate who took out loans is higher than ever before. It is especially troubling to consider the implications of these statistics for Millennials and the Gen Z long-term goals.
Why are Gen Z and Millennials so broke?
Generation Z and Millennials face increasing housing costs, healthcare costs, transportation costs, and basic goods. Additionally, compared to previous generations, young adults nowadays have higher student debt.
The Brookings Institution reported that the default rate had continued to rise among students who had to repay their loans up to 20 years after graduation. Since most Millennials began college between 1995 and 2003, roughly 40% of borrowers are predicted to default on their loans by 2023.
If we add the difficulty of finding stable, well-paying work to cover basic and unexpected expenses and more challenges to save, invest, and pursue financial wellness, we can find the reason why these generations are having a financial crisis.
The Impact of the Financial Struggles
The financial situation not only affects the net worth of Millennials and Gen Z-ers but also creates far-reaching consequences that permeate various aspects of their lives.
For most college graduates, student debt hinders their career start, as a significant portion of their income cannot be allocated to a retirement plan or long-term investment that would allow them to grow wealth over time.
With minimum wage salaries barely compensating basic living expenses, it’s harder for Millennials to advance in their careers, leading to tolls on their mental health, exacerbating stress, and heightening anxiety about their opportunities.
Additionally, the inability to achieve significant life milestones, such as homeownership, getting married, or starting a family, makes more Millennials feel left behind compared to other generations.
How to Break the Cycle
Gen Z and Millennials face challenges in achieving the median wealth that previous generations had easier access to attaining. However, there are practical solutions that can assist with becoming financially stable. Young people can take control of their financial future by adopting effective strategies and making informed choices.
Some of these strategies are:
Budgeting
Maintaining a budget is a fundamental step toward financial empowerment. Keeping track of your income and expenses will help you cut unnecessary spending and put more money toward savings or debt repayment. Many apps can simplify this process and make tracking your finances more manageable.
Here is a list of budgeting apps that Forbes has listed:
Honeydue is especially good if you're managing finances with your significant other.
Side hustles
There's a reason why side hustles have become popular for young people to boost their income. They offer additional earning opportunities outside of traditional employment. These extra earnings can be directed toward savings, debt reduction, investments, or additional expenses.
One particular way to improve your financial situation is through online surveys. One of the most reputable and user-friendly platforms around is Forthright. Besides being reliable and easy to use, you can earn various rewards, including cash and gift cards for some of your favorite retail stores.
This can be an excellent way to buy goods without compromising your budget. Plus, completing the surveys can be a manageable commitment. Joining Forthright can provide additional income without a significant time investment, making it a win-win situation overall.
Investing
While saving is essential, investing can be a powerful tool to grow wealth over time. If you're a broke Millennial or Gen Z earning a minimum wage and trying to grow your money, you should learn some key concepts that can help you.
Here are some of the most common and easy-to-understand financial terms and investment options:
Index funds:
In index funds, you don't have to pick individual stocks, which can be risky and time-consuming. Instead, index funds let you own a small piece of many different companies. Money is spread across multiple companies, so your money isn't impacted if one company doesn't do well.
High-yield savings accounts:
High-yield savings accounts offer a higher interest rate than regular savings accounts. A high-yield savings account can be a brilliant place to keep your emergency fund or savings for short-term goals, as it can help your money grow faster than in a regular savings account. It's a safe, secure way to save money, and you can access it whenever you want.
401(k) plans:
You can save for retirement with a 401(k) plan from your employer. This type of retirement account is called a 401(k) because that's the section of the tax code that defines it. You choose a percentage of your salary to go into your 401(k) account before taxes are deducted from your paycheck.
Fractional shares:
Investing in stocks can be costly, and if you don't have a lot of money, it might be hard to buy a full share. Investing in stocks with fractional shares is less expensive than purchasing a whole share. A fractional share is like buying a slice of pizza instead of the entire pizza.
Take Control of Your Finances and Make Informed Decisions
As you can see, the landscape for Millennials and Gen Z can change. If you're part of these two generations, you are more than capable of beginning your journey toward a more secure financial future.
At Datarich, we provide you with valuable updates, facts, and insights about money management and side hustles. Keep reading our blogs to stay informed and empowered on your journey toward financial success!