Nearly half of Gen Z get help from the Bank of Mom and Dad

the staff of the Ridgewood blog

Ridgewood NJ, in today’s high-cost living environment, many young adults find themselves turning to a familiar safety net: their parents. A recent report from Bank of America reveals that nearly half (46%) of Gen Zers, aged 18 to 27, rely on financial assistance from their families. Furthermore, 52% of them admit they don’t earn enough to live the life they desire, with day-to-day expenses being a significant barrier to their financial success.

“The high cost of living is certainly impacting Gen Z,” says Holly O’Neill, President of Retail Banking at Bank of America. This sentiment was echoed by more than 1,000 Gen Z adults who were surveyed in April and May by the financial institution.

The Financial Challenges Facing Gen Z

Many consumers are feeling the strain of higher prices, especially for essentials like food, gas, and housing. However, young adults just starting out face additional financial hurdles. Their wages, adjusted for inflation, are lower than what their parents earned in their 20s and 30s. Additionally, they carry larger student loan balances.

Compared to millennials, Gen Zers are spending significantly more on necessities than young adults did a decade ago. They also have the debt to prove it. Approximately 15% of Gen Zers have maxed out their credit cards and are at risk of falling behind on payments, more than any other generation, according to a May report from the New York Fed.

“What delinquency rates are showing is that there is increased stress among some segments of the population,” noted New York Fed researchers.

Housing Costs: A Major Barrier

Since the Covid pandemic, homeownership has emerged as a crucial tool for wealth creation. However, those priced out of the housing market have struggled to achieve similar financial security. “That is a massive challenge for wealth accumulation among Gen Z,” explains Brett House, an economics professor at Columbia Business School.

Bank of America found that, second only to food and groceries, housing is the most significant expense that young adults need help with. “The high cost of housing definitely is a barrier for them,” says O’Neill. The majority of Gen Z doesn’t pay for their own housing, and for those who do, the financial burden is heavy. Two-thirds of those surveyed spend more than 30% of their paycheck on housing, with nearly a quarter spending upwards of 50%.

O’Neill advises her own Gen Z children to follow the 50-30-20 rule: allocate 50% of a paycheck to necessities (including food, housing, and transportation), 30% to discretionary spending, and 20% to savings.

Financial Comfort: A Widespread Issue

It’s not just Gen Z struggling financially. A separate survey by Bankrate found that most Americans believe they don’t earn enough to live the life they want. Only 25% of all adults surveyed feel completely financially secure, down from 28% in 2023.

Respondents to the survey indicated they would need to earn $186,000 on average to live comfortably. To feel rich, they would need an average income of $520,000. Inflation, housing costs, and college affordability were cited as significant obstacles to achieving financial security.

“Many Americans are stuck somewhere between continued sticker shock from elevated prices, a lack of income gains, and a feeling that their hopes and dreams are out of touch with their financial capabilities,” says Mark Hamrick, Bankrate’s Senior Economic Analyst.

The financial landscape remains challenging for many, particularly young adults. As they navigate these economic hurdles, reliance on family support appears to be a necessary lifeline for many in Gen Z.

 

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