Navigating the world of personal finance is a daunting task for anyone, but it is a particularly pressing concern for Generation Z as they begin their careers and become financially independent. Aged between 18 and 26, Gen Z is grappling with new financial challenges at a time of high inflation, expensive college costs and a competitive job market.

One of the biggest financial concerns for Gen Z is their lack of emergency savings. The ability to save has been greatly impacted by the high cost of living and going to college, paired with the fact many Gen Zers are working at entry-level jobs.

The effects of these financial concerns seep into Gen Z’s wellbeing, too. According to Bankrate’s recent financial wellness survey, over half of Gen Z respondents say that financial concerns have a negative impact on their mental health, which can make it all the more difficult to focus on and manage finances.

Here’s a breakdown of how Gen Z approaches money, what factors influence their approach and what advice others have for those of this generation.

Key financial insights on Gen Z

  • Gen Z are the most likely to prefer less volatile investments: 38 percent moved their money out of stock-related investments and/or withheld additional contributions in favor of savings accounts, money market funds, CDs or government bonds. By comparison, 33 percent of millennials and 17 percent of Gen Xers did the same. (Bankrate investing survey)
  • Considering the state of the economy, including higher interest rates and elevated inflation, 53 percent of Gen Zers say they will invest more in an investment/retirement account. (Bankrate investing survey)
  • Of Gen Z, 52 percent say that money has a negative impact on their mental health. (Bankrate’s money and mental health survey)
  • Over half (52 percent) of Gen Zers say the biggest money concern that negatively impacts their mental health is inflation and rising prices; 54 percent cite paying for everyday expenses. (Bankrate’s money and mental health survey)
  • More than a quarter (27 percent) of Gen Zers say that they are unemployed and looking for a new job. (Bankrate’s job seeker survey)

What money problems cause Gen Z the most financial stress?

Financial stress broadly refers to anxiety and worry caused by money-related challenges. As Gen Z enters adulthood and faces new financial challenges, along with becoming financially independent, stress related to personal finance is a common issue. The financial pressures they face aren’t just causing economic insecurity, but also creating emotional distress that impacts their daily lives.

Of Gen Zers who noted that money negatively impacts their mental health, 32 percent said it affects them daily while 34 percent said it affects them weekly, according to Bankrate’s financial wellness survey. Those in this age group face a number of unique financial challenges that come with independence for the first time, such as:

  • Going to (and paying for) college
  • Beginning a career
  • Establishing a budget from scratch
  • Starting an emergency fund

The top cited financial stressor for Gen Z was paying for everyday expenses, cited by 54 percent. Concern over being able to afford things ties in with the second most cited stressor, inflation and rising prices, which 52 percent of Gen Z cited. Following inflation is housing costs, cited by 47 percent.

The economic environment has clearly played a part in affecting Gen Z’s mental health. They not only have to worry about high prices as they’re beginning their adult lives, but they also have the increasing cost of higher education weighing them down, with student loan repayments expected to resume in October 2023. Over a quarter (27 percent) of Gen Zers say they currently have student loan debt, according to a Bankrate survey.

Finally, emergency savings is a topic of concern for many U.S. adults, and Gen Z is no exception. In fact, regrets about not saving enough for emergency expenses are more likely to affect Gen Z than other generations, with 21 percent of Gen Z having these regrets, 17 percent of millennials, 13 percent of Gen Xers and 9 percent of baby boomers. Without an adequate safety net provided by emergency savings, any unexpected expense can lead to mounting debt along with added financial anxiety and uncertainty.

Gen Zers can begin an emergency fund by contributing small amounts to a high-yield savings account, which will accumulate earnings at a faster pace than a typical savings account. Over time, regular contributions can grow into a substantial emergency fund.

What’s causing Gen Z’s lack of financial independence?

Achieving financial independence from parents is a considerable challenge among Gen Z. Compared with baby boomers, for example, Gen Zers believe adults should begin to independently pay for various bills around one to three years sooner than the older generation, on average, according to Bankrate’s financial independence survey. While this disparity is no doubt a product of changing economic circumstances and social norms, it also reflects a financial reality faced by Gen Zers.

A majority of Gen Zers (61 percent) say they are somewhat or very financially dependent on their parents still, a June study by Experian found. This stark statistic underscores the difficulty that many Gen Zers face in the financial landscape of adulthood.

Among Gen Zers who are financially insecure, 44 percent point to low earnings and not enough career mobility as reasons why they’re financially insecure, Bankrate’s financial freedom survey found. Meanwhile, 49 percent cite inflation as a reason. For many in this age group, employment opportunities often come in the form of low-paying jobs, unstable gig work and limited career growth. Coupled with the inflated cost of living, the path to financial independence becomes incredibly steep.

This economic pressure leads to precarious financial habits for Gen Z, with 51 percent saying they live paycheck to paycheck, according to Deloitte. The constant struggle to make ends meet leaves little room for savings or investments, reinforcing a cycle of financial instability and, in many cases, dependence on parents’ incomes. Many Gen Zers may be left vulnerable to unexpected costs — considering their concern over a lack of emergency savings — and financial planning for the future may seem pointless or even impossible.

Comparing Gen Z’s money mindset to previous generations

Every generation approaches money with a unique perspective shaped by their experiences and technological advancements. Gen Z came of age during multiple financial crises, including growing up amid the Great Recession and reaching adulthood during the COVID-19 pandemic. They’ve also come into a financial world much more dominated by technology than it was in the past.

Here are some ways Gen Z sets themselves apart from their predecessors:

  • Tech-savvy entrepreneurship: Gen Z grew up in a digital age, surrounded by technology that has shaped their lifestyle and their approach to money. Many Gen Zers can leverage technology to pursue their passions and even turn them into successful side hustles. According to Bankrate’s side hustle survey, 53 percent of Gen Z respondents say they have a side hustle, the highest of any generation.
  • Embracing digital banking: About half of Gen Z has an online savings account at a bank with no branches, according to Bankrate’s competitive savings survey. The convenience of digital banking features, along with the high interest rates and low fees of online banks, attests to Gen Z’s tech-savvy nature and desire to have control over their finances.
  • Early investors: Gen Z is showing an early interest in investing. About 35 percent of Gen Zers have stock or stock-related investments, according to Bankrate’s investing survey. Their comfort with technology and widespread access to investment information online have likely contributed to this proactive approach to growing their wealth.
  • More concern over job security: While generations before them are more likely to cite being in debt as a major stressor, Gen Z is less likely to do so. Instead, they are more concerned about job security, with 38 percent of those who say money affects their mental health citing not having a stable income as a factor, according to the Bankrate money and mental health survey. Having grown up during the Great Recession and, in many cases, having just entered the workforce, it is no surprise that job security is on many Gen Zers’ minds.

Financial advice for Gen Z from Bankrate experts

We asked Bankrate experts across various generations for what advice they’d give to Gen Zers, based on their own experiences, lessons learned and regrets from younger years. Here’s what they had to say.

Greg McBride Headshot

Get in the habit of saving 15 percent of your income right off the top. Put 10 percent of your income toward retirement and the rest to building your emergency fund. If you can get in the habit of saving 15 percent of your income while you’re young and your earnings and expenses are low, the habit will stay with you in the years ahead as your income and expenses grow.

—Greg McBride, CFA, Bankrate Chief Financial Analyst

Ted Rossman Headshot

While retirement may feel far off, there’s no better time to start saving for retirement than when you’re young. Every dollar you invest in your 20s could grow to $45 by the time you retire, assuming a 10 percent annual return. Even if you start small — such as investing at least enough to earn the employer 401(k) match — your future self will thank you.

—Ted Rossman, Bankrate Senior Industry Analyst

Sarah Foster Headshot

It wouldn’t be surprising if the economy’s got you down. Younger Americans are saving less for emergencies, taking on more credit card debt and pulling back on their retirement accounts because of inflation. They’ve been grappling with student loan debt, and amid ongoing inventory challenges and rising mortgage rates, it’s not getting any easier for them to buy a home. It’s fair and valid to feel disillusioned, but apathy gives these major financial barriers even more power to harm your finances. For Gen Zers hoping to avoid financial regrets later on, it’s important to remember that no step is too small, and you don’t have to wait for the economy to work in your favor to build wealth. What matters most is building the habit and the time you give yourself to get started.

—Sarah Foster, Bankrate Principal U.S. Economy Reporter

Bottom line

The high rate of dependence on parents and the stress about paying for everyday living expenses reveal a generation grappling with economic challenges that undermine their financial security. Gen Z’s journey toward financial independence will require more opportunities for well-paid work, affordable housing options and accessible financial education.

Gen Zers are resilient, though. They’re taking on more side hustles than any other generation, and they’re taking advantage of competitive online savings rates, which can be a secure and fruitful investment strategy while rates are high. As they continue to make financial strides, it’s important that Gen Zers focus on a savings strategy that prioritizes retirement and emergency fund contributions, which can ensure their financial security during hardships and for the future.

Frequently asked questions

  • The meaning of financial independence varies depending on its context. The phrase describes a state of being self-reliant when it comes to paying for everyday living expenses. For the purpose of this article, financial independence means not relying on parents to be able to cover living costs.
  • The amount of money needed to become financially independent will vary depending on your living costs. To calculate how much you’d need to achieve financial independence from parents, you’ll need to consider housing costs and bills, everyday necessities, personal debts, savings and retirement contributions and future goals. Start by making a budget to evaluate all of your costs and begin making room for savings.
  • A study by Redfin found that 30 percent of 25-year-olds owned their homes in 2022. Many bought homes in 2020 and 2021, when there were record-low mortgage rates.