Wage Growth And Inflation Drive Gen Z Spending

Young adults continued to spend even while the rest of the US made cuts.

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Most people start out in adulthood in debt and with tight budgets. Gen Z not.

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Over the past year, two once-in-a-generation drivers—decades-high inflation and a tight employment market that has driven significant wage growth, especially at entry levels—have boosted spending by the youngest group of US people. Also, the forced inactivity just at height of a pandemic increased savings.

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Young adults today tend to be heavier spenders, according to credit-card data and surveys, whether it's because they have to in order to survive in the face of rising costs or since they can afford to splash out on travel and recreation.

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The 22-year-old Taylor Price, who has more than 1 million followers on social media sites like TikTok and Instagram thanks to her advice on investing, saving, and spending, claimed that "Gen Zs are not afraid to spend. She claimed that this generation is more concerned with making money than with protecting it.

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Those in Gen Z were born between 1997 and 2012. Even while the younger children still reside with their parents, many of them are of an age where they can consider major expenditures like a car. Knowing what drives them can help determine where the economy is going.

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According to a Bank of America Corp. survey of individuals, members of Gen Z are more inclined than members of other generations to mix economic ambition with the goal of living comfortably. About half of respondents claimed that being able to purchase material goods motivated them to become financially successful. Intuit, a provider of financial software, discovered in a separate survey that nearly three out of four Gen Zers would prefer to have a higher quality of life than more money in the bank.

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It focuses on the experiences for Kloee King. She is a salesperson for a tech business and spends a large portion of her income on trips with friends and her dog. The 23-year-old is reasonably frugal with her money, making regular contributions to a Roth IRA and 401(k) account. She uses the remaining funds for Seattle rent, vacation, and church donations.

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King said of occasions like hen parties and weddings: "Things that are related to recollections or that are like buying for a memory - I'll spend the money on it. That was worthwhile.

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According to data from Visa Inc. predicated on purchases from its own brand credit cards, Gen Z has been the only age group over the previous two and a half years that has seen a bigger share of its cohort spend more than they did 12 months earlier. This includes the end of the previous year, when Americans of all ages made budget cuts.

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According to Joshua Erabu, a social media financial advisor, Gen Z uses credit cards differently than previous generations. Although using credit frequently has traditionally been a sign of financial stress, many younger Americans see it as a method to accumulate points and incentives, even when they have the money to pay immediately, according to Erabu.

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Even though younger individuals often earn less money in absolute terms, salary growth can also help to explain some of young adults' hyperactive spending habits. According to data from the Federal Reserve Bank of Atlanta, American workers between the ages of 16 and 24 are the only demographic whose pay growth has continuously outpaced the consumer price index throughout the pandemic.

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The notion of accumulated savings is another factor. According to research from the Bank of America Institute, throughout the epidemic, a record number of Americans between the ages of 18 and 24 were living and working in their families' homes, which helped Gen Zers increase their savings and checking account balances the greatest of any generation.

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Although other generations cut back, Gen Z continued to spend.

When the index is greater than 100, it indicates that more consumers increased their spending from the previous year. At the end of 2022, older cohorts declined below 100.

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Young people pay more for almost everything in the current economy, just like any other generation, and rising food, rent, and other necessity prices also assist to explain their spending patterns. Gen Z adults encounter the same obstacles as their predecessors.

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According to the Bank of America Institute, young Black Americans in particular may struggle with debt. At the same time, the study found that a similar percentage of young Hispanics have no investments and that just about 40% of Gen Z women have emergency savings that will last them for three months.

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According to the Bank of America Institute, the cohort as a whole is so driven to have financial security that three out of every four stated they are taking or considering actions to acquire additional money, such having a second job. For Sammie Walker, who splits his time between working at a deli and a pizza parlor when he's not in class, that is the truth.

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The 22-year-old is on schedule to graduate from the University of West Florida in Pensacola in 2024, despite the fact that he is currently saving money by living at home a little more than two hours away. Although he aspires to own a home someday, that day is still far off.

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The American dream is no longer as accessible as it once was, according to Walker. "I just have a feeling that the timeline will be much further off than past generations," the speaker said.