But consequences from a once-in-a-lifetime pandemic, including record-breaking housing costs, threaten to stifle their nascent careers.
Jason Dorsey, president of The Center for Generational Kinetics, a leading research and advisory firm focused on Gen-Z and Millennials, told Newsweek that young Americans face growing financial challenges.
“Gen-Z has entered adulthood in a very challenging and precarious time,” he said. “It is a perfect storm they have crashed into, with rising costs of rent, higher inflation, and high job losses.”
That has created, in some, a feeling of powerlessness.
“And we’re hearing in our research that they are frustrated because they feel like they keep being negatively affected by trends beyond their control,” Dorsey said.
Financial advisors have long endorsed the ‘30% rule’ — one followed by the Department of Housing and Urban Development (HUD) — that renters should spend no more than 30% of their net monthly income on housing costs.
But rent prices are rising up to four times faster than income in many places, according to data from Real Estate Witch.
Nationwide rental prices have skyrocketed in 2022, up nearly 14.1%, according to the July 2022 Apartment List National Rent Report. This leaves young adults like 24-year-old Jeffrey Peterson with limited options.
Peterson, a personal trainer at Method Fitness in Northern Virginia, said that none of the units he has seen during his housing search came close to meeting the suggested 30% criteria.
“For the lifestyle I would like, it is almost impossible for me to get a one-bedroom place for under $2,000 a month,” he told Newsweek. “You can find something decent for a little less than $2,000, but it’s not even priced that much lower, and it’s usually not ideal in terms of location or amenities.”
The average price of a one-bedroom apartment in Arlington, where Peterson lives, Virginia, is a whopping $2,308 per month, according to Zumper.
At that price, the rent is between $500 and $1,000 more per month than the average young adult in the area can reasonably afford, based on a regional starting salary of $59,548 for those with a bachelor’s degree and a statewide median wage of $36,430.94 for all 18 to 24-year-olds in the region, as reported by Yahoo Finance.
And unfortunately, when it comes to affordability, Arlington is not an anomaly.
More data from Apartment List shows that rents increased in 97 of the nation’s 100 largest cities in June. That same month, the median national rent price topped $2,000 for the first time, according to Redfin.
At this price point, Peterson, along with his peers, has been pushed to make tough compromises — weighing whether he should sacrifice his desired amenities, live further away from the city center to secure a lower rent price, or try to find roommates.
Considering the high cost of living in many cities, many in Gen-Z have even chosen to stay with or move back into the family home.
“There are obviously a bunch of reasons that people do not want to live at home anymore,” Peterson said, “but a lot of people don’t think they are gaining the things they want by going into another roommate situation or living far away while still paying a lot for it.”
Some 58% of adults between 18 and 24 were still living with their parents last year, according to census data. The most common factor behind people’s decision to do so was money.
And while staying home may have some financial benefits, Dorsey worries that the long-term costs may outweigh the benefits.
“Gen-Z is living with their parents longer than they expected,” he said, “which affects all sorts of things from social life to identity, to how they feel about self-reliance.”
“Many feel like they have delayed things that they had really hoped to start,” he added, “so there is a sense of frustration that they have missed out on things they thought they would already do by now — like having an apartment, being settled into that place, making new friends, etc.”
Experts have expressed concerns that these delays in reaching important life milestones could dramatically affect the financial health of this generation.
A report from Bank of America Research predicted that consequences of the pandemic, like high inflation, would affect Gen Z’s financial and professional future in similar fashion to how the Great Recession influenced millennials.
“Like the financial crisis in 2008 to 2009 for millennials, COVID will challenge and impede Gen Z’s career and earning potential,” the report read, adding that a significant portion of Gen Z entered adulthood in the middle of a recession, just as a cohort of millennials did.
And as these warning signals grow louder, more young adults are losing confidence in their financial futures.
“I think it is going to push people away from saving and investing money,” Peterson said. “As much as they value money, young people are starting to value experience too.”
Harper’s magazine reported in its August issue that the percentage of Gen Z-ers utilizing “buy now, pay later” services has increased nearly 10-fold, and nearly half (43%) of those doing so have missed at least one payment, while 30% have missed at least two.
And in a recent study by the Center for Generational Kinetics, only a slim majority (51%) of Gen Z-ers in the United States said that they feel that the American Dream is still possible for them.
Dorsey tried to lighten this dark picture with some optimism. He said he remains convinced that young people will remain resilient and are up to the challenges they face. He cites their openness, technological savvy, and access to information as reasons for hope.
“Gen Z has much more awareness of their personal finances than other generations did at that age,” he said. “They have come of age with all these tools that allow them to monitor finances and invest in all these different things through mobile apps.”
While this generation might be getting hit the hardest by rising costs in the short-term, “what they do have is access to more information about their finances than any previous generation,” Dorsey said.
But Dorsey said it is a responsibility of the society as a whole to help this new generation succeed in these challenging times.
“We must work together to make sure that Gen Z feels like they can be successful and achieve their dreams while providing the tools and resources to get there,” he said.
“That does not mean it is going to be easy,” Dorsey said, “but it certainly means that they should feel like there is more support.”
