The Blubber

Gen Z’s Financial Struggles: Spending Outpaces Savings

Younger Americans are financially vulnerable, with less than a month’s worth of savings to cover their expenses—leaving them at risk should the economy take a downturn.

Spending More Than They Save

According to Bank of America Institute’s latest analysis, Gen Z—those born after 1995—spent twice the amount they had in savings on average in February. This savings-to-spending gap has widened over the past two years and is significantly larger than for other generations.

This financial strain is partly due to lower earnings—many Gen Z workers are still in entry-level positions and earn less than their older peers. As a result, they spend a larger portion of their income on necessities like rent and utilities. However, Gen Z is also splurging on discretionary expenses, including travel and entertainment.

Spending on non-essential items among Gen Z consumers has jumped over 25% from last year, far outpacing overall spending growth.

Inflation, Higher Costs, and Economic Uncertainty

While Gen Z workers are still seeing strong wage growth, their financial outlook is worsening. Rising inflation, higher borrowing costs, and dwindling pandemic-era savings have taken a toll.

Consumer sentiment has plunged, with a University of Michigan report revealing that Americans’ expectations for their financial future have hit an all-time low.

Job Market Woes for Gen Z

A weakening labor market is further compounding the issue. The Bank of America report highlights a nearly 30% surge in Gen Z households receiving unemployment benefits over the past year—the largest increase among all generations.

Additionally, rising underemployment means many young workers are stuck in jobs below their qualifications, which could have long-term consequences for their careers.

With consumer spending driving the U.S. economy, economists and policymakers are closely watching how Gen Z’s financial struggles could impact broader economic growth. Some retailers are already warning of weaker demand ahead.