Gen Z adults spend twice as much as they make and don’t have enough saved to cover a month’s expenses. But they could be leveraging their big advantage over older counterparts

Gen Z habits may be unsustainable

The Bank of America report found that Gen Z’s per-household spending on both necessary and discretionary items has grown faster than the overall population.

For example, in the past year, their spending on entertainment and travel rose 25.5%. Experien reports that the average Gen Zer carries $3,456 in credit-card debt.

While they’re spending a lot on the here and now, they aren’t saving long term. Only 20% of Gen Zers are saving for retirement, according to a 2024 Teachers Insurance and Annuity Association of America (TIAA) report.

They don’t even have much saved in their bank accounts. Federal Reserve data shows that Americans under 35 have less cash in their transaction accounts than older cohorts, with a median balance of $5,400 — compared to $7,500 for 35 to 44-year-olds; $8,700 for 45 to 54-year-olds; and $13,400 for those aged 65 to 74).

Gen Zers are clearly trailing. While part of that can be attributed to lower wages, it may also be a byproduct of the way they prioritize discretionary purchases.

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How Gen Zers can improve their financial outlook

If you're a Gen Zer without much in the way of savings, take heart. You’re young, meaning you have the advantage of time to build wealth and fund a comfortable retirement.

You just need to prioritize your finances. Here are some ways to do that.

Track spending with budgeting apps. Gen Z is technically savvy, so budgeting apps that integrate your bank and credit card accounts are an easy way to track and categorize your spending. This will help make you more mindful of your spending habits, and help identify discretionary expenses that you can cut back on.

Make monthly savings part of your budget. Automate a monthly contribution to your savings account when your paycheck hits. Build up an emergency fund to cover three or more months of expenses.

Start investing in your retirement now. Over time, small contributions can go a long way. For example, if you invest $200 a month in an IRA or a 401(k) over 40 years, you're looking at retiring with about $479,000 at a 7% return. That’s roughly 2.5 times as much as the typical older American has in their retirement nest egg.

Take advantage of employer matching dollars in your 401(k). If you get a raise, apply it to your retirement savings. It won’t feel like you’re missing the extra money – you just won’t get used to seeing it in your paycheck from the start.

Boost your income with a side hustle. In late 2024, 66% of Gen Z and millennial workers had started or were planning to start a side hustle, with 65% intending to continue in 2025, according to Intuit. This can help you build an emergency fund and nest egg while freeing up money for more discretionary spending.

Invest your earnings. It doesn’t have to be complicated; S&P 500 index funds are a good bet, as they allow you to build an instantly diversified portfolio without having to do a ton of research. If you need help, consider talking to a financial planner.

Gen Zers have lots of time to get to a more financially secure place. It’s just a matter of starting on the right path — right now — to leverage the time that’s on their side.