When it comes to building wealth, each generation is on a slightly different trajectory, shaped by a changing economy, digital advancements and changing cultural norms. . The youngest and newest working Americans — Generation Z — are just beginning to make their mark and develop their own net value.
Average Net Worth of Generation Z
Generation Z, or Generation Z, includes individuals born between 1997 and 2012. The oldest members of this generation turn 25 and are actively participating in the workforce, becoming homeowners, set up families and set up their own businesses. The youngest members of this generation are only 10 years old.
Most Gen Zers are still in the early stages of their wealth-building journey, in part because many have yet to enter the workforce and those who are working have yet to enter their high-income years. their best.
Follow The Federal Reserve’s 2019 Survey of Consumer FinancesAmericans under the age of 35 (a mix of millennials and Gen Zers) have an average net worth of $76,000.
How does Gen Z’s net worth compare to other generations?
Compared to older generations, Gen Zer’s average net worth is lower. The average of millennials over the age of 35 is more than $400,000. People in Generation X have an average net worth of $400,000 to $833,000, and older generations including Baby Boomers and Silent Generation have an average net worth in the millions of dollars.
It’s no surprise that Gen Z has the lowest median net worth of all generations as there are only a handful of them in the workforce and entry-level jobs often pay low. than. Lower income leads to lower savings and investment contributions. One recent report released by Deloitte shows that 46% of Gen Zers are living on paycheck and more than a quarter of Gen Zers are not confident that they will be able to retire comfortably. The typical annual salary for Generation Z workers varies from state to state, but the average across all states is $32,500 in 2021, according to recent research by the GoBankingRates.
“For many people, their twenties are the time in life when they begin their professional life and possibly a new career. Their earning potential can be a bit limited, says Paul Deer, a certified financial planner at Personal Capital, which could make it difficult to build net worth this decade. towel.
Investing has also been a top priority for many of this generation. Nearly 40% have no investment, and the top reasons for not investing include not having more money to spare (44%), not knowing where to start (31%) and feeling that investing is too risky (23%), according to a Bank of America Survey. The same survey shows that while some Gen Z are prioritizing home ownership, which is often seen as an important way to build net worth, the majority are reluctant to become homeowners due to the high price tag. housing increases and daily expenses increase.
What shapes Gen Z’s net worth and financial future?
Several factors have played a role in this generation’s ability to build and grow their net worth. The combination of the recession, record inflation, soaring education costs and stagnant wages have created significant barriers to wealth building.
Generation Z is still new to the workforce
Many are younger: half of this generation are still under 18, two-thirds are still in school or university, and only a quarter of Gen Zers are of working age. Even for those entering the workforce, they can still gain a foothold when it comes to their professional careers and earn entry-level salaries.
“Millennials and Gen Z are earlier in the earning, saving, and accumulating stage,” said Richard Bertain, financial advisor at Pasadena-based UBS. “Savings seem to be low and the habit of saving, in many cases, has not yet become a habit.”
The Great Recession sets the tone for Gen Z’s money management
While the oldest Gen Zers were only in their teens during the 2007-2009 recession, many people still remember watching siblings struggle to find work while Pay off large student loans. As a result, studies show that although Zers are saving less for retirement than older generations, they are saving a larger share of their income. Gen Z spends 20% on average their income to retire, compared with the average 15% contribution from millennials.
However, when it comes to setting financial goals, Gen Zers are working, unmarried and unmarried people tend to Prioritize immediate goals like paying off credit cards, student loans and construction emergency fund excessive savings for retirement.
Generation Z has more student loan debt than previous generations
According to one Analysis of the Ministry of Education, federal student loan debt accrues at $1.6 trillion and is growing for more than 45 million borrowers. Generation Zers on average have $20,900 in student debt — 13% more than millennials, according to the Fed. And 7.7% of Gen Z have balances over $50,000.
As a result, some Gen Zers skip important milestones like buying a home, starting a family, or investing for retirement. Certain measures such as a one-time loan forgiveness program for students may give Gen Zers hope that they will have more disposable income to fund future financial milestones, but not all student loan borrowers will benefit from this program and some Gen Zers have outstanding balances. far from the maximum forgiven amount.
The COVID-19 pandemic is expected to have a lasting effect on this generation
For many Gen Zers, the pandemic has ushered in the second major economic crisis of their lives, one that is still ravaging their personal finances and its full effects are yet to be seen. see. A report of Georgetown University found that 25% of Gen Z adults (18-23 years old), who were already short on savings before the pandemic, said they had spent all of their savings or delayed saving or paying off debt. since the pandemic broke out.
3 ways Gen Zer can build their net worth
The good news is that Gen Zers get to spend time with them. And building and maintaining a strong net worth is all about making positive financial choices now and later that pay off. Some ways to stay on track:
1. Prioritize debt repayment and savings: High debt balances, and especially high-interest debt, can hinder the achievement of other financial goals. Experts say that building good savings habits early and continuing to do them as you get older and earn more can make all the difference.
“Higher incomes can easily be swallowed up in mortgages and car purchases, parenting expenses, and squandering on luxuries like fancy vacations and hearty dinners. . Instead, it’s important to maintain the savings and investment disciplines established in the previous decade and even increase the percentage of income saved, if possible,” says Deer.
2. Entrepreneurship: Starting your own business can be a major driver of wealth and some Gen Zers have taken note. The combination of 9 to 5 fatigue, unparalleled social media skills, and growing social awareness is driving Gen Zers away from the traditional corporate work environment for startups. their own profession. One Microsoft’s 2022 survey found that over 60% of Gen Zers have started — or intend to start — their own business.
3. Early investment: Some experts recommend setting aside the word 15%-25% of your after-tax income to invest, although this may be slightly different for everyone. However, the sooner you start investing, even if it’s just a few dollars, the more time your money has to grow and work for you thanks to compound interest.
“The key is to establish good financial habits and disciplines that will help you build net worth for the rest of your life,” says Deer.