Why 60 Percent of Gen Z’s Live Paycheck to Paycheck

• Paycheck-to-paycheck consumers cite a variety of reasons for their financial lifestyle, with Gen Z the most likely to cite splurging on nonessentials as a financial stressor.
• Despite more indulgent spending behaviors, young adults have higher savings relative to their annual income.
• Gen Z consumers are more likely to cite buying a home or car as top financial goals, and less likely to cite retirement.

Inflation has dropped from its peak of 9.1% in July 2022 to 3.5% as of March 2024.¹ This percentage rate has gone up in the last couple months, showing that consumers still face the financial pressure of rising prices on essentials such as food, energy and shelter. In this economic environment, younger adults — Generation Z consumers, in particular — are likely to find making ends meet a challenge. While 58% of all consumers live paycheck to paycheck, this number sits at 59% among Gen Z, even as half of this generation live in homes where they pay nothing toward rent or mortgage. With such a financial cushion, the question remains as to why these young adults struggle to live within their means. One answer: Gen Z consumers cite splurging on nonessential items as a top reason for their financial lifestyle.

• What’s at Stake
• Key Findings
• Conclusion
• Methodology

What’s at Stake

With ongoing inflationary pressures, more than half of U.S. consumers struggle to cover monthly expenses and put aside savings. As of March 2024, 58% lived paycheck to paycheck, a slight drop from 60% this time last year. These consumers are in all income levels. This includes 41% of those earning more than $100,000, though the share has dropped 8 percentage points from last year. Seventy-five percent of lower-income and 62% of middle-income consumers lived paycheck to paycheck in March 2024. These shares indicate that these consumers feel the financial crunch of the rising costs of living.

Similar shares of working adults across age groups live paycheck to paycheck. Among Gen Z consumers, 59% say they lead this financial lifestyle. At first glance, being a young adult could explain Gen Z’s financial standing. In the early days of their careers, they may work entry-level jobs or lower-paying retail and service positions if not still in school, finishing degrees. Gen Z consumers also tend to live with others, such as family or friends. They are also more likely to receive supplemental incomes and financial support. In addition, these young adults report discretionary spending as a top reason for their financial distress, making it difficult to be financially independent.

These are just some of the findings in this edition of “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence exclusive report. This edition, Why Gen Z Consumers Struggle to Achieve Financial Independence, looks at the financial lifestyles of U.S. consumers and how inflationary pressures and other financial challenges impact younger adults’ ability to gain financial self-reliance. This edition draws on results from a survey of 3,405 U.S. consumers conducted from March 5 to March 15 and an analysis of other economic data.^{2 3 4}

Key Findings

Regardless of age, most consumers live paycheck to paycheck, though the reasons why vary.

A deep dive into generational differences among consumers living paycheck to paycheck shows that financial distress remains constant throughout their working lives. At 59%, Gen Z consumers are not the generation that reports living paycheck to paycheck at the highest rates. The share of zillennials and millennials living paycheck to paycheck sits at 63% each. Among bridge millennials and Generation X consumers, it sits at 61%. The share falls to 51% among baby boomers and seniors. Various factors impact consumers’ financial lifestyles, including the stage of life and related financial responsibilities.

Insufficient income is the most-cited financial stressor for paycheck-to-paycheck consumers in all age groups.

Among millennials and bridge millennials, dependent family costs, large amounts of debt and savings-depleting events are the next leading reasons. For instance, 20% of these consumers cite large amounts of debt as the top reason they live paycheck to paycheck. Fifteen percent cite dependent family costs as the top reason.

Gen Z consumers, at 34%, are the most likely to cite nonessential spending as a reason they live paycheck to paycheck. Nineteen percent cite such splurges as the top reason. This behavior tends to decline with age, with 13% of millennials, 7.9% of Gen X and 3.8% of baby boomers and seniors citing nonessential spending as the top reason for their financial lifestyle. Unstable job situations also tend to decline with age. Gen Z consumers, at 7.5%, are the most likely to cite unstable job situations as the top reason for their financial lifestyle.

While further highlighting how the factors impacting consumers’ financial standing vary at different stages of life, these findings also suggest that even as Gen Z consumers have fewer financial responsibilities, many struggle to live within their means because they do not manage their discretionary spending effectively.

Despite more indulgent spending behaviors, Gen Z consumers report relatively high savings rates.

Gen X consumers, baby boomers and seniors allot more than 60% of monthly income to housing, supplies and other regular bills. Gen Z consumers allocated just 47% to those expenses. In fact, Gen Z consumers expect to spend just 20% of their income on housing. This share is well below the 30% Gen X consumers and 28% baby boomers and seniors expect to spend.

Data shows Gen Z generally channel this surplus to personal spending. Gen Z consumers, at 13%, expect to spend more than other age groups on everyday personal expenses. These young adults also spend the highest share of their monthly income on recreation, leisure and entertainment as well clothing and accessories.

Despite their higher rate of discretionary spending, Gen Z consumers save a slightly larger portion of their income, at 9.8%, than other age groups.

As their annual income tends to be lower, the average amount Gen Z consumers have in available savings, roughly $9,000, is lower than all other age groups. They average just more than half the amount saved, on average, by baby boomers and seniors. Gen Z consumers report having, on average, 3.2 months’ worth of income in readily available savings. Millennials have just 2.1 months’ worth. Data shows that Gen Z consumers can save relatively more months’ worth of savings because their average housing costs are lower, and they are 10% less likely to face emergency expenses than the average consumer. While 55% of millennials and bridge millennials faced unexpected expenses in the three months before May 2023, just 42% of Gen Z consumers did so.

6 in 10 Gen Z consumers live paycheck to paycheck, even as half do not pay rent or mortgage payments.

As noted earlier, 59% of Gen Z consumers live paycheck to paycheck. This is true even as they pay a lower portion of their monthly expenses toward essentials. In fact, 35% of Gen Z consumers say they live with somebody else and pay no rent. Just 5.9% of millennials and 4% Gen X consumers say the same.

This situation is temporary for many of these younger consumers. More than one third of Gen Z consumers living in someone else’s home without paying rent expect to move out in the next three years. Seventy percent say they are at least somewhat likely to do so in the next five years.

These findings further show the impact of splurging on nonessentials. Living in someone else’s house without paying rent is an opportunity to put aside savings. Unless they change their spending priorities, many young adults will continue to live paycheck to paycheck.

Receiving financial aid from family or friends can help struggling consumers cover their monthly expenses. In fact, 27% report that someone else pays some of their bills. They also report that paying these bills themselves would increase their spending by 40%, on average. Gen Z consumers are more than twice as likely as average to report that someone else pays at least one of their bills.

Having others pay their bills is not unique to Gen Z consumers. Assistance tends to shift from parents to a romantic partner as age progresses, with the size of assistance from partners more than that of parents among every age group except Gen Z.

Gen Z consumers are more likely to cite buying a home or car as their top financial goals and less likely to cite retirement.

Half of consumers cite setting aside savings for unexpected events and saving for retirement as financial goals. Thirteen percent cite saving for unexpected expenses, and 20% cite saving for retirement as their top financial goal. Interestingly, 13% of Gen Z consumers say setting aside money for emergencies is their top financial goal, even though they are less likely to face these events.

Certain financial goals become more popular with age. For example, just 7.4% of Gen Z consumers cite saving for retirement as their number one financial goal, 30% of Gen X consumers said the same.

Other goals decline in popularity, although attainment could explain at least part of this trend. Gen Z consumers, for instance, are twice as likely as millennials to say buying a house or vehicle is their top financial goal. While 11% of Gen Z consumers cite buying a vehicle as their top financial goal, just 6.8% of millennials do. Compared to 15% of Gen Z consumers, just 9% of millennials cite buying a house as their top financial goal.

At 89%, Gen Z consumers are the most likely to think they can own a home in the next 20 years. Education and entrepreneurship items are also more often cited among Gen Z consumers. This is evidence that these young adults have their sights set on financial independence, despite the current economic environment.

Conclusion

With many yet to launch into well-paying jobs or careers, Gen Z remains a vulnerable age group, as they tend to earn less than older consumers. As a result, 6 in 10 Gen Z consumers live paycheck to paycheck, with their pay just covering monthly expenses. This is true even as they average smaller shares of essential expenditures, such as housing and groceries.

Gen Z consumers are more apt to spend their surplus on nonessential goods and services. Doing so makes it harder for many to live within their means. Gen Z consumers are the most likely to live with others and receive financial support from their parents, brothers or sisters.

With such a financial cushion, young adults who manage their discretionary spend have an easier time putting aside savings and meeting their financial goals, such as buying a home or going back to school — actions that lead to self-sufficiency.

Methodology

“New Reality Check: The Paycheck-to-Paycheck Report: Why Gen Z Consumers Struggle to Achieve Financial Independence” is a PYMNTS Intelligence report. It draws on results from a survey of 3,405 U.S. consumers conducted from March 5 to March 15 as well as an analysis of other economic data. The Paycheck-to-Paycheck series expands on existing data released by government agencies, such as the Federal Reserve and the Bureau of Labor Statistics. It provides a deep look into the core elements of American consumers’ financial wellness: income, savings, debt and spending choices. Our sample was balanced to match the U.S. adult population in a set of key demographic variables: 51% of respondents identified as female, 33% were college educated and 38% had incomes of more than $100,000 per year.

Read PYMNTS’ March 2024 “New Reality Check: The Paycheck-to-Paycheck Report” for more.

<sup>1. [Author unknown. Consumer Price Index. U.S. Bureau of Labor Statistics. 2024. https://www.bls.gov/cpi/. Accessed April 2024.]↩
2. [Author unknown. Consumer Credit – G.19. Board of Governors of the Federal Reserve System. 2024. https://www.federalreserve.gov/releases/g19/current/. Accessed April 2024.]↩
3. [Author unknown. Current Employment Statistics – CES (National). U.S. Bureau of Labor Statistics. 2024. https://www.bls.gov/ces/. Accessed April 2024.]↩
4. [Author unknown. Consumer Price Index Summary. U.S. Bureau of Labor Statistics. 2024. https://www.bls.gov/news.release/cpi.nr0.htm. Accessed April 2024.]↩</sup>