Each generation faces its unique set of challenges. In the case of Generation Z, born between the mid-1990s and the early 2010s, it's becoming increasingly clear they face distinct financial hurdles that their parents and grandparents probably didn't face (definitely not at the grandparent level). Here's why:
Skyrocketing Education Costs
Colleges and universities at the four-year and higher level have been gouging the American public for decades, without any reversal. Even the pandemic didn't stop the rate of cost increase, instead only slowing it. One would think with the number of schools out there, competition would force costs down. Instead, all schools have been driving expenses up. And that has continued as people for decades as well have relied on student loans to pay a cost they otherwise never could have afforded. Much like housing, education has been an authorized house of cards built on debt pushed out 10, 20 and even 30 years for repayment. Unlike their parents and grandparents, however, Generation Z faces soaring costs for higher education that can't be reasonably paid back, even with financing. The burden of student loan debt literally handicaps any kind of solid financial footing at graduation. Combined with a job market that continues to be fickle and not promising for most without hard skills, the result is debt default or miserable existence working two or three jobs to stay alive.
A Paradigm-Changing Job Market
As noted above, the job market can't be relied on for a solid platform of income. This started in the early 1990s with Generation X and has only gotten worse. Additionally, Generation Z enters the workforce in an era marked by rapid technological advancements and automation. While automation and artificial intelligence offer numerous benefits, they also pose a direct challenge for jobs that would otherwise have gone to new graduates. So, people have to freelance to make ends meet. The emergence of the gig economy and the prevalence of temporary or contract work often leave Generation Z without the stability and benefits their parents and grandparents enjoyed, much the way temp work screwed over Generation X in the 90s.
Housing Affordability Crisis
The classic American dream of homeownership, once attainable for many in previous generations, is pretty much out of reach for most in Generation Z. Escalating housing prices, coupled with stagnant wages, have created a housing affordability crisis. The burden of high rent prices and the inability to save for a down payment has left many in this generation trapped in a cycle of renting, preventing them from building equity and financial security. Instead of lowering prices to increase demand, homebuilders have been playing a game of squeezing supply to keep prices high for each unit sold. Government gives big speeches about increasing home affordability and availability, but the proof is in the inventory availability, which remains scant. No surprise, more and more people shift to renting as a result, which in turn drives up rent prices and makes them unaffordable as well. Regional migration has been a serious problem for years, only reversed temporarily with the pandemic and remote work (which of course is being reversed back by companies).
Economic Inequality and Wealth Disparities
Generation Z inherits a world characterized by significant economic wealth disparities. The top 1% of society controls an increasingly large portion of wealth, far more than earlier generations, while the middle class struggles to keep pace with rising costs reducing their numbers. Poverty and working poor have grown in numbers and concentrations. The combination makes it more challenging for Generation Z to achieve upward mobility and accumulate assets, as they start with fewer financial resources and opportunities compared to their parents and grandparents. A lack of willingness to work and be discipline is regular attributed to Generation Z, but when there is no clear path to success, there is motivation to work, something many of the critics fail to mention when condemning the young today. Because they are educated far more than previous generations, many in Gen Z recognize they are being used for pennies versus accepting it quietly and hoping to move up eventually. So they refuse to work, period.
The above dynamics are also wiping out career movement opportunities for Gen Z as well. Boomers and Gen X in the struggling middle class are not retiring timely. Instead they are working longer, doing more, working more jobs and they get the work being experienced, skilled and able to produce quickly. That delays the entrance and promotion of Gen Z workers who cost more in training and time to get up to speed in production. Ergo, Gen Z's end up becoming more frustrated going nowhere, which becomes a vicious circle of no job, no skill, no hire.
Rising Cost of Healthcare
Generation Z faces the burden of exorbitant healthcare costs, another area where they may struggle more than previous generations. The ever-increasing prices of health insurance premiums, coupled with rising medical expenses, has a profound impact on their financial well-being. This strain hinders their ability to save for the future and cover unexpected medical emergencies similar to how student loans eat up basic income. In short, if you're too busy just trying to breathe above water, you can't really focus on swimming anywhere to get out of the ocean.
Generation Z is in a perfect storm of skyrocketing costs of education, the changing job market, the housing affordability crisis, economic inequality, and rising healthcare costs collectively contribute to the financial struggles that Generation Z will face. As a Generation X person myself who went through the Bush Recession in the 1990s with no job and no future right after the booming 1980s, I know that frustration, and I could easily say it will pass and they will be fine. However, there are systemic problems that make personal finance now very different from 30 years ago. We suspected at the time that Generation X might be the first generation that makes less than their parents, but it's becoming really apparent with our kids in the 2020s, and that's not a good economic sign for anyone involved.
