It’s no secret that Millenials (born between about 1981 and 1996) have inherited a set of challenging financial circumstances.
Millennials graduated into the Great Recession, faced steeply rising costs for basic expenses like housing, education, and healthcare, and struggled with slow wage growth, a shrunken social safety net, and an uncertain financial future.
The Zoomers of Generation Z are poised to inherit many of the same issues, along with some new ones, such as graduating into a once-in-a-lifetime pandemic. No matter what side of the generational divide they fall, young people experience many of the same financial challenges, which makes it worth considering how Millenials have fared and how their experience might influence Gen Z going forward.
1. Income inequality is rising
One of the biggest factors impacting the financial health of Millennials and Gen Z is rising income inequality. According to the Economic Policy Institute, from 1979 to 2018, net productivity rose 69.6%, while the hourly pay increased only 11.6% after adjusting for inflation.
Meanwhile, the wealth gap between America’s haves and have-nots nearly doubled between 1989 and 2016. According to Pew Research, by 2016, the top 5% held 248 times as much wealth as the median. With wealth concentrating near the top and wages stagnant, it can be difficult to make ends meet.
While this affects people of all age groups who aren’t in the top wealth percentiles, young people who have spent their entire working careers faced with slow wage growth are especially hard hit.
2. The cost of living is increasing
Basic expenses are getting more expensive, which impacts both Millennial and Zoomer finances. For example, according to a report by Super Money, home prices have increased by 39% in the last 45 years, while the income of 25 to 34-year-olds has remained stagnant. Similarly, childcare costs have soared, with the average annual cost for childcare for a single child at $8,700 in 2018.
These escalating expenses make it difficult for young people to get ahead. As a result, many Millennials have delayed having children, which is something Zoomers will also have to take into consideration as they enter their mid to late twenties.
3. Avoid credit card debt (but do take advantage of credit cards)
When times are tough, it’s easy to put basic expenses on a credit card and hope that things will get better in the future. However, racking up a sizable debt burden can make it increasingly difficult to make ends meet, thanks to accumulating interest. If possible, you should try to avoid credit card debt, even if it means having to reign in spending and live on a tight budget.
Just because you should avoid credit card debt, however, doesn’t mean you should avoid credit cards. There are many options for reward credit cards so you earn money (who would want to pass up that!?) on your everyday expenses. As long as you use credit cards responsibly and pay off the balance in full each month, they’re a great way to earn extra on everyday spending.
4. Student loans are unsustainable
The cost of higher education has also dramatically increased, without an accompanying increase in wages for college graduates. While members of previous generations might have been able to finance their education by working part-time or summer jobs, Millennials who choose to pursue higher education have often graduated saddled by thousands of dollars of student loan debt.
In recent years, there has been increasing popular support for student debt cancellation and free public college, both of which would help to address the problem of soaring education costs. Not everyone goes to college solely because they think it’s a good idea financially—many do so to continue their education, or to pursue careers in fields that are rewarding but not high-earning. Education is intrinsically valuable, no matter what the sticker price is.
That said, Zoomers would do well to learn from Millennials, and consider the burden of student loan debt when making decisions about their future.
5. Careers no longer always have clear trajectories
Previous generations may have held a reasonable expectation of organic career advancement. If you put in the work, the theory went, your employer would reward you with raises and promotions, and it was possible to work your way up the ladder throughout your career.
Today, that’s no longer always the case. Millennials are more likely than previous generations to move from job to job at different companies, rather than stick with a single employer for most of their careers. This isn’t because Millennials are fickle, however; it’s because changing jobs is now one of the most effective ways to increase your income. For Gen Z grads entering the job market, they should be realistic about their long-term plans and understand that job-hopping is sometimes a necessity.
6. Healthcare is more expensive
If you end up in the emergency room and you don’t have healthcare, you could be saddled with a bill for thousands of dollars. If you end up in the emergency room and you do have healthcare, your bill will likely be less—but that doesn’t mean that it will be affordable. Healthcare is another area where costs have risen faster than wages, with a for-profit healthcare system designed to maximize earnings rather than prioritize care.
Premium health insurance, whether through your employer or purchased on the marketplace, will definitely help to defer healthcare costs. But even then, Americans may be thousands of dollars out of pocket for health emergencies.
Millennials have grown increasingly in favor of universal healthcare, which would help to reduce healthcare costs and ensure that all Americans have access to quality healthcare. In 2019, 69% of Millennials polled supported Medicare for All.
7. One job may not be enough
Along with changing jobs more frequently, Millennials are also more likely to have multiple jobs. In 2011, Millennials made an average of $10,972 per year from their side hustles, which was 20% more than Gen X and 46% more than baby boomers. While some Millennials relish the freedom that comes with multiple sources of income, most young people work more than one job for a simple reason: because they need to make ends meet.
Members of Gen Z may also find it necessary to adopt side hustles in order to pay bills or get ahead financially.
8. It’s important to have a budget
With financial resources for many young people tighter than ever, it’s even more important to make (and stick to) a budget. Budgeting can help you to get a clear-eyed view of your finances. This helps you to make informed financial decisions, understand and regulate your spending, and plan for the future.
Budgeting tools like PocketSmith allow you to get a birds-eye view of your finances, create and maintain a budget, analyze past financial patterns, and even project your finances into the future to see how your finances might look months or years ahead.
The app is completely customizable and full of lots of helpful tools that you can mix and match in order to create your ideal budgeting setup.
8. Always save for a rainy day
If it’s one thing that Millennials have internalized, it’s that the financial future is uncertain. Events like “once in a century” recessions, pandemics, and natural disasters mean that the future isn’t guaranteed, and there’s often little you can do to control the outcome.
One thing that you can do, at least to the best of your ability, is to save for a rainy day. Socking away a hefty emergency fund can help you to weather turbulent financial times and even to help others who haven’t been as fortunate. Millennials are known for being financially savvy and fiscally cautious, two traits that Gen Z should consider emulating.
9. We can work toward a better future
With so many statistics about rising income inequality, steep increases in the cost of living, depressed earnings, and economic uncertainty, it can feel like the cards are stacked against young people, whether they are Millennials or Zoomers. However, there’s still a lot that young people can accomplish when they work together.
From protests surrounding racism and climate change to support for more equitable government programs like an expanded social safety net and universal healthcare, Millennials and Gen Z can be a powerful voice for change.
In many ways, Generation Z is in a similar boat to Millennials when it comes to personal finance. Many of the strategies that Millennials have learned through experience, like trying to minimize debt and maximize savings, are solid strategies for people of any age group that Zoomers should consider adopting.
More importantly, Millennials and Gen Z together represent a powerful coalition that can work towards addressing many of the issues that face the world today.