Generation Z, people born between 1997 and 2012, is facing high unemployment, and the American dream of homeownership is virtually unattainable. Oh, and in the next five to 15 years, this same group will become the richest generation in history.
A new Bank of America study reports that Gen Z is set to amass about $36 trillion over the next five years and over $74 trillion by around 2040.
So how does a generation that seems locked out of financial opportunities suddenly become an economic force? The answer – wealth transfer. More baby boomers will pass assets to Gen Z over the five to 15 year period, according to BofA.
The Line Forms Here
Financial research firm Cerulli Associates projects that wealth transferred through 2048 will total $124 trillion. However, the transfer will not necessarily go entirely to Gen Z. In line ahead of them will be Gen X and Millennials.
Cerulli expects over $105 trillion will go to heirs, while about $18 trillion will go to charity. Nearly $100 trillion will be transferred from Baby Boomers and older generations, representing 81% of all transfers.
Economic, Market, and Social Disruptors
That financial shift will have a profound impact. For one thing, it will put a lot of money in the hands of consumers who are used to spending.
“It’s likely they will be among the most disruptive generations to economies, markets, and social systems,” according to the report. “Whether it’s due to changing diets or reduced alcohol consumption or saving and housing, Gen Z will redefine what it means to be a U.S. consumer.”
One of the reasons Gen Z is spending so much is that it faces a high cost of living.
Big Spenders
Spending growth among Gen Z, both on necessary and discretionary goods, has increased faster than that of the overall population, according to BofA credit and debit card figures. This group is spending nearly twice as much as it has in savings.
By 2030, Gen Z’s spending is expected to reach $12.6 trillion worldwide compared to $2.7 trillion as of 2024.
For discretionary categories such as entertainment and travel, Gen Z spending growth is notably stronger, up 25.5% year-over-year in February.
Big Expenses
In February, their spending on non-discretionary items such as rent and utilities was higher than the overall population. In addition, childcare costs keep rising just as this generation is beginning to start families.
Consequently, 52% of Gen Z respondents reported that they aren’t making enough money to live the life they want. In addition, the high cost of living is one of their main financial challenges, according to the 2024 Better Money Habits report.
The Deloitte 2024 Gen Z and Millennial Survey came to a similar finding.
That report stated: “Three in 10 say they do not feel financially secure. And roughly six in 10 live paycheck to paycheck. The cost of living remains their top concern by a wide margin compared to their other leading concerns, which include climate change, unemployment, mental health, and crime/personal safety.”
Savings Challenge
The BofA survey finds that, “while Gen Z understands the importance of saving, many are not able to put aside as much money as they’d like.”
On average, Gen Zers do not have enough savings at the end of one month to cover expenses for another month, according to BofA. Most financial planners recommend having a reserve that could cover three to six months of expenses.
As a result, 32% of survey respondents told BofA they felt they were behind where their parents were at the same age.
A Rough Start
Like the generations of their grandparents and great grandparents, who faced World War and the Great Depression, Gen Z has come of age in traumatic times.
Many of this age group began entering the job market burdened with record student loan debt at the same time Covid-19 lockdowns were going into effect. The resulting economic upheaval raised challenges for Gen Z including a difficult labor market, notes BofA. Those challenges linger.
Gen Z households collecting unemployment benefits rose nearly 32% in February compared to last year, according to the study.
Unemployment was up 9% in February for new entrants into the labor market. That figure has trended upward since 2023, says BofA. Notably, Gen Z makes up a significant number of that group.
Overeducated And Underemployed
The BofA study calls Gen Z “overeducated and underemployed.”
About 57% of 18-21-year-olds were enrolled in either two-year or four-year colleges by 2022, according to the report. On the other hand, 54% of Millennials were in college at the same age in 2003, while only 43% of Gen Xers were in college in 1987.
Higher education is likely to lead to higher employment and higher wages, according to the research.
“In fact, using Bank of America deposit account data,” the study revealed, “we found wage growth for Gen Z was up nearly 8% YoY (year over year) in February – the most among all generations – and about twice as high as the overall median.”
Changing The Workforce
Advances and disruption in the workforce are occurring at warp speed. A major influencer in this rapid transformation is Gen Z.
They embrace technology more quickly than any age group before them. In fact, Gen Z is also referred to as iGeneration, Digital Natives, Net Generation, and Zoomers. Those designations all refer to that age group’s affinity for tech
That said, the influence of older generations is not to be denied.
For the first time, five generations are in the workforce at the same time, according to Janet Truncale, EY Global Chair and CEO.
“By 2034, 80% of the workforce in advanced economies will comprise Millennials, Gen Z, and the first Gen Alphas to become adults. In this landscape of shrinking talent, multigenerational workforces are key to our future,” writes Truncale in the World Economic Forum (WEF).
Gen Z Quicker Out The Door
Multigenerational cooperation may be a key to a business’s success, but do not expect Gen Z employees to be around to get a gold watch.
Over one-third (38%) of respondents to the 2024 EY Work Reimagined Survey said they were likely to quit their jobs in the next year. That represented a 4% increase over the previous year’s survey. Significantly, most of those respondents were from Gen Z.
“Keeping this generation at work is important to driving innovation and signalling new ideas and new methods that help us see what the future may look like,” writes Truncale. “The full potential of business transformation will depend to a great extent on Gen Z.”
Read More:
- Trump Plan To ‘Fix The Economy’ May Do The Opposite
- Social Security Fix Requires Political Courage
- Fighting Rising Prescription Drug Prices
Read the full article here
