Bank of America published its "Best Financial Habits of 2023" survey, which reveals changes in the spending priorities of the Gen Z in the U.S. (that is, those born between 1997 and 2012). Results show a generation that is torn between discouragement and the dilemma of when to spend versus when to save. For many of them, high prices are undermining their purchasing power and their new scenario is based on being methodical with money, limiting and reducing unnecessary expenses.
The study was conducted by Ipsos in English and Spanish during August 2023, and is based on a nationally representative sample of 1,167 Gen Z adults, including 276 African Americans, 267 Hispanics, and 616 women.
A New Generation of Budgeteers on the rise
Gen Z members are changing their lifestyle to combat the rising cost of living: 85% of them said they face at least one financial challenge and 53% feel that Inflation is one.
Three in four respondents said they made changes to their daily lives such as reducing spending on food and gasoline. Almost all in this situation (96%) plan to maintain these adjustments over the next year. One in three also limited spending in supermarkets, with 79% of these maintaining this change for the next year.
Almost half of Gen Z's surveyed have now replaced restaurants and food deliveries establishments with homemade meals, an attitude that 90% plan to continue doing over the next year as well.
Regarding spending on clothing, 40% of respondents reduced their consumption and 79% of them plan to continue doing so over the next 12 months as well.
Looking to improve their financial health
The report also talks about the emotional impact that these financial obstacles are generating in them, making emphasis on their capacity for economic independence and feeling of success according to their financial performance. Over the past year, one-third of Gen Z's surveyed experienced a financial setback, such as being forced to stop saving or taking on debt, something that led to a decrease in their self-esteem.
When facing financial issues, one in four sought solutions by borrowing money from friends or family. The report points out that Gen Z's experiencing economic setbacks are three times more likely to become more dependent on their loved ones than other generations. Less than half (48%) would call themselves economically independent from a financial point of view.
The results also describe a generation that looks at the future with considerable skepticism: only one in four (24%) of Gen Z's respondents trust that the economy will improve. In terms of optimism about the future, confidence among Generation Z is declining, as only 32% are confident that the labor market will improve, compared to 46% in 2021.
These feelings can be explained by the fact that is a generation entering the adult world in an era of multiple global crises. Last year, Collins Language Lovers Blog determined that 2022's Word of the Year was permacrisis: "a term that perfectly embodies the dizzying sense of lurching from one unprecedented event to another, as we wonder bleakly what new horrors might be around the corner.
Data reflects that half of Gen Z's (56%) do not have enough emergency savings to cover three months of expenses. While Gen Z's have a high regard for their own ability to manage their daily financial activities, such as managing daily expenses (69%), keeping a budget (70%) and managing credit (67%); they feel unprepared regarding more complex financial planning topics, such as saving for retirement (45%) or investing in the stock market (29%).
Hispanics and women are more optimistic
When it comes to Hispanics surveyed, the results are better in terms of optimism regarding the future: nearly half (49%) are confident they are on track to achieve their financial goals.
However, the main challenges to achieving economic success according to the Hispanics surveyed are the high cost of living (49% saying it was the main one), the state of the economy (31%) and debt (21%). Exactly half of the Hispanics surveyed said they have not been able to save money during the last year.
Hispanic Gen Z's are also in a weak financial situation when it comes to savings, as 68% said they have enough emergency funds to cover three months of expenses, something even higher than their non-Hispanic peers who reported be 52% in this case.
For Hispanics, the three main financial priorities for the next year are getting a new job or better position (37%), continuing their education (33%) and paying their debts (29%). When it comes to job mobility, Hispanics Gen Z's are in a slightly better position than their Gen Z's peers overall. Latinos have changed jobs at a moderately higher rate than their peers, a reported 32% in front of their non-Hispanic peers 24%. The rate at which Gen Z Hispanics have successfully landed better jobs with higher wages is also slightly higher than that of their peers with a result of 32% compared to 24% of their non-Hispanic peers.
Finally, for Gen Z women, they face wide gaps in their financial preparedness compared to men. It emerges from the report that Generation Z women feel less confident (49%) that they are on the right path to achieving their financial goals than men (55%). Women Gen Z's also feel less prepared than their male peers to manage their finances independently (56% vs. 63%) and save for retirement (40% vs. 51%). However, self-confidence is higher in terms of managing their current daily finances, since women feel almost equally prepared to manage their daily finances (70%) than men (68%).
While Women Gen Z's feel that they face many challenges, they are optimistic about their financial future and are taking control of their careers. More than half of Women Gen Z's (58%) said they feel optimistic about their financial future; the same as men (57%). Also, they are changing jobs more than their male peers over the past year (37% vs. to 30%). Looking ahead, Women Gen Zs' top four priorities include expanding their training (39% versus 33% of men), getting a new job (32% almost equal to 31% of men) and paying off their debts (29% versus 23%).
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