A recent report has unveiled intriguing insights into the financial habits of Generation Z consumers, shedding light on their management and allocation of monthly income. Unlike older generations such as Generation X, baby boomers, and seniors, Gen Z consumers are setting aside nearly 10% of their monthly income, a higher proportion than other age groups.
The Paycheck-to-Paycheck Report, conducted by PYMNTS Intelligence and based on surveys with over 3,400 U.S. consumers, discovered that Gen Z consumers allocate just 47% of their income to essential expenses such as housing, supplies, and bills. This is significantly less than the 60% or more that other age groups allocate to these costs.
What sets Gen Z apart from other generations is their inclination to live with others, such as family or friends, who contribute to paying the bills. This communal living arrangement enables them to save a larger portion of their income compared to other age groups. However, the report also revealed that when Gen Z consumers have surplus income, they are more likely to spend it on personal items, with 13% expecting to spend more on everyday personal expenses than other age groups.
Despite allocating a smaller share of their income to essential expenses, Gen Z consumers are saving a slightly larger portion of their income, with an average of 9.8%. However, the average amount saved by Gen Z consumers is lower than that of older generations, with an average of approximately $9,100 in savings, which is just over half of what baby boomers and seniors have saved. This difference in savings could be attributed to the fact that Gen Z consumers are still in the early stages of their careers and earn less than older generations.
While Gen Z consumers may be able to save more due to lower housing costs and fewer unexpected expenses, such as facing emergency costs, 42% of Gen Z consumers had to navigate unexpected costs over a 90-day period, compared to 55% of millennials and bridge millennials. This underscores the importance of having a sufficient financial cushion to fall back on, especially for younger consumers who have yet to establish themselves in their careers.
The report also highlights the potential vulnerability of Gen Z consumers if their shared living arrangements were to change, leading to a decrease in their spending power. While it is commendable that they are setting aside a significant portion of their income, it is important for Gen Z consumers to reassess their discretionary spending and prioritize building a more robust financial safety net.
In conclusion, the financial habits of Gen Z consumers set them apart from older generations in terms of how they manage and allocate their income. While they excel in saving a larger portion of their income, they still face challenges in building substantial savings due to their early career stages and lower earning potential. Moving forward, Gen Z consumers should focus on striking a balance between saving and managing discretionary spending to secure a more stable financial future.