Gen Z and Financial Anxiety: Why This Generation Is Taking Debt Avoidance Seriously
Written by
Martin Dasko
Edited by
Molly Sullivan
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An article on MarketWatch a few months ago pointed out how Gen Z knows it has a debt problem and is getting help for it. Expert sources shared that Gen Z is trying to become more cautious about spending to avoid debt. The Washington Post noted a few months ago that Gen Z is spending more on expenses like rent and insurance than millennials. However, based on data from Experian, credit scores are on the rise for Gen Z, with the average credit score among Gen Z being 680 in the third quarter of 2023, which is a good range.
This article will examine why Gen Z is taking a cautious approach to debt by taking debt avoidance seriously.
They’ve Witnessed Millennials and Other Generations Struggle With Debt
“Gen Z has spent the majority of their teen years and adult lives hearing just how difficult it is for millennials to manage their student loan and credit card debt,” said Erika Kullberg, an attorney, personal finance expert and founder of Erika.com. “Gen Z gets a bad reputation, but they’re listening and learning from the mistakes of older generations.”
Those who fall into the Gen Z demographic were born between 1995 and 2012, so they’ve grown up hearing about how expensive student loans have become, and they may have heard about older relatives falling into massive amounts of debt. Since most of us are influenced by those around us and the circumstances we grow up in, it shouldn’t be a surprise that Gen Z may make avoiding debt a bigger priority.
“Growing up post-2008 financial crisis, they saw firsthand the deep marks it left on the economy and personal finances alike,” remarked Alex Langan, the chief investment officer of Langan Financial Group. “Families faced their fair share of struggles-from spiraling debts to stagnant wages — and Gen Z saw that it wasn’t easy.”
Millennials who graduated during the financial crisis and older generations who saw investments dwindle likely shared their experiences with Gen Z so that they could avoid a similar fate.
Langan added, “These experiences sharpened their senses of the dangers tied to debt, especially with the skyrocketing costs of education, and many members of Gen Z (speaking generally) tend to put financial security first.”
Gen Z Has Easy Access to Financial Information
Langan pointed out that the internet has also been incredible for Gen Z in terms of their finances. They have all the financial information they could want right at their fingertips, and it’s easier than ever to learn about complex topics that used to require a formal education.
Mike Roberts, the co-founder of City Creek Mortgage, elaborated, “Unlike earlier generations, Gen Z has a wealth of information at their fingertips — whether it’s through online courses, YouTube videos or social media platforms like TikTok.”
Based on a recent survey from Insurify, it turns out that 22% of Gen Z rely on TikTok for their financial advice. While there are inherent issues with accepting advice on a complex topic like personal finance from strangers, the good news is that young people are at least seeking financial guidance.
Langan added, “Younger people (if they want to) can make more informed decisions about student loans and credit card use, and they’re dialing up efforts to save and invest for the future.”
They’re Open To Discussing Finances With Friends
“In the past, talking about money was a no-no, but this generation is so open and clued into what other people’s financial challenges look like thanks to the frequent online conversations about money,” Kullberg said. “You can’t blame them for deciding they want to take a different approach to money as they start their adult lives.”
A recent example of transparency surrounding finances is the “loud budgeting” trend, where young people embrace saving money by proudly declaring social opportunities that would risk their financial goals. This trend also involves openly sharing why you’re turning down an event that requires you to spend money because it doesn’t align with your financial goals.
For example, a young person would practice loud budgeting by informing their friend that they can’t commit to the destination wedding because it would impact their other financial goals. This movement was about empowerment and helping younger generations feel comfortable speaking up. Discussing finances openly with friends could eliminate the number of young people racking up credit card balances to try to keep up with their peers.
Gen Z Has Support Systems for Financial Help
Roberts noted that Gen Z is tapping into communities and groups on Reddit and Discord and even creating their own to support each other. This generation isn’t likely to gatekeep information and may prefer to uplift each other. In a world where costs and daily expenses are skyrocketing, the importance of building wealth and saving is more emphasized than ever. With support systems available, members of Gen Z don’t have to feel alone when it comes to money management and trying to figure out how to save up for the future.
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