Yahoo Finance Gen Z Money Habits: How Much the Average Person in Their 20s Spends Monthly
Gen Z — currently aged 11 to 26 — is facing a specific set of financial challenges. Becoming young adults amid a tricky economic landscape that includes stubborn inflation and soaring interest rates.
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Yet, not all doom and gloom for Gen Zers, as they also have a set of tools at their disposal that older generations didn’t have — such as easier and faster access to financial information thanks to apps and social media.
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So How Much Are They Spending Monthly?
According to Michael Collins, CFA, founder and CEO, WinCap Financial, the average monthly spending for Gen Z, those currently in their early 20s, ranges from $1,000 to $3,000. This number includes essential expenses such as rent, groceries, transportation, and discretionary spending such as dining out and entertainment, added Collins, citing data from Self.
In contrast, in their 20s, millennials tended to spend slightly more, primarily due to higher rent prices during their early adult years and a stronger inclination toward dining out and travel, he said.
What Are Other Money Habits of Gen Zers?
Since Gen Zers are at the start of their careers, their incomes are on the lower-end, on average.
“This means comparatively more of their income goes to essentials, ” said Moody’s Analytics economist Matt Colyar.
According to Colyar, rent, for instance, accounts for 7% of U.S. households’ spending on average — yet for Gen Z, it’s almost 20%.
“Strong rent growth in the aftermath of the pandemic has been painful,” he said, adding that while younger people have seen stronger-than-average wage growth, high rent has crowded out spending and, importantly, savings.
“An inability to save for a down payment to buy a home given high rents and a shortage of homes means the biggest financial asset that U.S. households have — their house, is likely out of reach for many,” added Colyar.
He noted, however, that a similar dynamic was long feared to threaten millennials’ financial well-being, and recent more encouraging data has shown that millennial homeownership isn’t faring all that badly.
“Though the U.S. housing shortage is unlikely to be fixed anytime soon, Gen-Z shouldn’t be written off either,” he said. “They entered the labor market in the aftermath of the pandemic, far more favorable conditions than millennials in the wake of the global financial crisis.”
Hardest Hit by Inflation
Another important factor is that this generation is the hardest hit by inflation, according to Moody’s data.
Indeed, Gen Z adults spend the largest share of their income on inflationary pain points such as takeout/restaurants and vehicle insurance — and they spend 7% of their income on food away from home.
Yet, while inflation is putting pressure on Gen Z’s wallets, they have a distinct advantage in the job market — over representing some of the industries that have struggled to find and retain staff, according to Moody’s.
Digital-First Approach, Financial Literacy, and Early Investing
Other defining money habits include Gen Zers’ heavy reliance on digital banking, fintech apps, and online payment methods.
“Traditional banking is less appealing unless it offers digital platforms and convenient locations,” said Collins.
He noted that there is also a noticeable increase in financial literacy among Gen Z, as they frequently seek out information on investing, saving, and budgeting through social media, podcasts, and online.
Finally, unlike previous generations, Gen Z shows a strong interest in investing early.
“They are more inclined to use platforms like Robinhood or WeBull to start investing small amounts of money in stocks or cryptocurrency,” said Collins. “They are also taking advantage of Roth IRAs, created in 1997, an account type that Gen X and Boomers did not have in their 20s.”
What Are the Other Defining Money Habits of Gen Zers?
According to Akeiva M. Ellis, MSFP, CPA/PFS, CFP, ChSNC and expert contributor for Annuity.org, while Gen Z’s spending, generally, is not drastically different from other generations, the key difference lies in how they spend their money.
For instance, they tend to value experiences more than material possessions, which can translate into spending more on travel, dining out, and social activities rather than accumulating physical items, said Ellis.
In addition, many in this generation are wary of student loan debt, having witnessed the financial struggles of previous generations, said Ellis, and as a result, they might opt for alternative education paths, such as online courses, community colleges, or starting careers straight out of high school.
“These habits reflect their adaptability and forward-thinking mindset as they navigate the financial landscape,” added Ellis.
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