Sorry, Gen Z, but economic anxiety isn’t going away

By Erin Lowry

Less than a third of Gen Z feels financially secure while just more than half feels “very or extremely worried about not having enough money,” according to a recent study by consulting firm EY. “Welcome, the water’s warm!” says every American millennial.

After years of being told conditions would improve and to just grow up, millennials, as a collective, are treading water at best. In fact, 73 per cent of millennials are likely to be living paycheck to paycheck, according to a LendingClub report. A separate survey by Investopedia found that three-fourths of millennials, who range in age from 27 to 42, were at least somewhat stressed about their finances.

Financial anxiety has become an exhausting part of adulthood reality, especially when it seems as if another recession or major world shock could upend whatever financial security younger adults have established.

As a personal finance writer, I’d love to tell millennials and older Gen Zers (the full generation ranges from 11 to 26) that just changing their mindset and taking control of their financial lives would release them from worry. To a degree, it’s true. Focusing on what’s within your control, identifying your core values and learning how to live within your means while splurging on that which you care most about can yield what feels like a rich life.

But none of these behaviors is easy, and all of them require achieving a baseline of financial comfort that is often elusive to young consumers who haven’t had a chance to build up savings or establish deep professional networks.

Even diligent financial behaviors don’t always serve as protection. The most robust emergency savings funds were easily drained in the pandemic for those in industries that shut down for extended periods. Inflation has eaten away at the gains of negotiating for a higher salary, getting a promotion or job-hopping for more money. Young adults also have to shell out a significantly greater portion of their income on housing than their parents did.

What’s more, we can’t manifest away the existence of social and economic structures that have historically disenfranchised some individuals. That dynamic has also inhibited the ability to create and pass down generational wealth that enables others to start life on second or third base.

And in the US, where there are few safety nets for those who fall on hard times, individuals are responsible for shoring up their finances to weather the most unexpected of storms. Oh, and to not have a significant health crisis because medical bills are thought to be a leading cause of bankruptcy. No wonder Gen Z is worried.

It doesn’t help that the US is so firmly rooted in the notion of individualism that many efforts to change policies to protect the American people are decried as paternalistic, or, worse, socialist.

Personally, I find it frustrating that we’ve allowed our country to link a necessity like health care with employment. Losing a job often causes severe financial strain on its own; it’s inexcusable that unemployed workers also must grapple with trying to obtain health care without employer subsidies.

In 2021, the Federal Reserve Bank of St. Louis published an essay titled “Millennials Are Catching Up in Terms of Generational Wealth.” That optimistic headline belied a bracing truth: While millennials’ economic security was improving, the generation as a whole was still 11 per cent below the expectations for how much wealth the typical family should have at that stage. Younger millennials and older Gen Zers (people born in the 1990s) were 50 per cent below wealth expectations. Perhaps more important, this data didn’t even factor in the effects of the pandemic, which even the authors of the paper said could be “a major headwind for millennials.”

I worry that the older Gen Z cohort will have a similar experience to millennials, when as soon as they gain a foothold, they will face a “once in a lifetime” event such as a severe recession, a job loss or another calamity that erodes the progress.

The optimistic side of me hopes that Gen Z will learn from both millennials and Gen Xers. The generation already has a healthy skepticism of college degrees and the often-associated student loan burden.

Gen Z also seems ready to set boundaries around their time to push back against technology that allows endless workdays for many jobs. Of course, spending a little less time online outside work hours might help release some of the anxiety Gen Z workers are feeling.

And I’m hopeful that Gen Z, as the first true generation of digital natives, will find a way to harness the powers of new technology to overcome economic obstacles and progress in their careers. Their comfort with rapid technological change is something they can feel good about it. At least until Gen Alpha hits the workforce.