Average net worth of Gen Z

When it comes to creating wealth, each generation follows a slightly different trajectory, shaped by a changing economy, digital advancements and shifting cultural norms. America’s youngest and newest working people – Generation Z – are just beginning to make their mark and grow their own net worth.

Average net worth of Gen Z

Generation Z, or Gen Z, is made up of individuals born between 1997 and 2012. The oldest members of this generation are 25 years old and actively participating in the labor market, becoming homeowners, starting families and starting their own businesses. The youngest members of this generation are only 10 years old.

Most Gen Zers are still at the very beginning of their wealth-building journey, in part because many have yet to join the workforce and those who are working have yet to enter their prime. years of income.

According to the Federal Reserve’s 2019 Survey of Consumer Finances, Americans under 35 (a mix of millennials and Gen Z) have an average net worth of $76,000.

How does the net worth of Gen Z compare to other generations?

Compared to older generations, the average net worth of Generation Zer is insufficient. The average millennial over 35 is over $400,000. Those in Gen X have an average net worth between $400,000 and $833,000, and older generations, including baby boomers and the silent generation, have an average net worth that runs into the millions.

It’s no surprise that Gen Z has the lowest average net worth of any generation, since there are only a small number in the workforce, and entry-level jobs usually have lower salaries. Falling incomes translated into lower savings and investment contributions. A recent report by Deloitte found that 46% of Gen Zers live paycheck to paycheck and more than a quarter of Gen Zers aren’t confident they’ll be able to take their retirement comfortably. The typical annual salary of Gen Z workers varies by state, but the average across all states was $32,500 in 2021, according to a recent study by GoBankingRates.

“For many people, their twenties are the time in their lives when they begin their professional life and eventually a new career. Their earning potential may be somewhat limited, which could make it difficult to build net worth in this decade,” says Paul Deer, Certified Financial Planner at Personal Capital.

Investing has also been put on the back burner by many of this generation. Nearly 40% have no investment, and the top reasons for not investing include not having extra funds to save (44%), not knowing where to start (31%) and thinking that investing is too risky (23%), according to one bank. of the America survey. The same survey found that while some Gen Zers prioritize home ownership, which is often touted as a key way to build net worth, the majority are slow to become homeowners in due to soaring house prices and rising daily costs.

What shaped the net worth and financial future of Gen Z?

Several factors played a role in this generation’s ability to build and grow their net worth. A combination of economic downturns, record inflation, rising education costs and stagnant wages have all created significant impediments to wealth creation.

Gen Z is still new to the job market

Many Gen Zers are younger: Half of this generation is still under 18, two-thirds are still of school or college age, and only a quarter of Gen Zers are of legal age. to work. Even for those who participate in the labor market, they are probably still gaining a foothold in terms of their professional careers and earning base salaries.

“Millennials and Generation Z are earlier in the earning, saving and accumulating phase,” says Richard Bertain, Pasadena-based financial adviser for UBS. “Savings seem uneven and the habit of saving, in many cases, has not yet become a habit.”

The Great Recession set the tone for Gen Z’s money management

While the oldest Gen Zers were just tweens during the 2007-2009 recession, many still remember watching their older siblings struggle to find jobs while paying off large student loans. . As a result, studies show that even though Gen Zers save less for retirement than older generations, they save more of their income. Gen Z sets aside an average of 20% of their income for retirement, compared to a median contribution of 15% for Millennials.

Yet when it comes to setting financial goals, Gen Z workers who aren’t yet married and haven’t started a family tend to prioritize more immediate goals like paying off cards. credit, student loans and building up their emergency funds rather than saving for retirement.

Generation Z has more student debt than previous generations

According to an analysis by the Department of Education, cumulative federal student loan debt is $1.6 trillion and growing for more than 45 million borrowers. Gen Zers have, on average, $20,900 in student debt, 13% more than millennials, according to the Fed. And 7.7% of Gen Zers have balances over $50,000.

As a result, some Gen Zers have postponed important milestones such as buying a home, starting a family, or investing for retirement. Some measures like the unique student loan forgiveness program have given Gen Zers hope that they will have more disposable income to fund future financial stages, but not all student borrowers will benefit from this program and some Gen Zers have balances that far exceed the maximum cashback amount.

The COVID-19 pandemic is expected to have long-lasting effects on this generation

For many Gen Zers, the pandemic ushered in the second major economic crisis of their lives, one that continues to wreak havoc on their personal finances and the full effects of which remain to be seen. A Georgetown University report found that 25% of Gen Z adults (ages 18-23), who were already short on savings before the pandemic, said they either spent their savings or delayed their savings or paid off their debts since the pandemic hit.

3 Ways Gen Zers Can Grow Their Net Worth

The good news: Gen Zers have time on their side. And building and maintaining a strong net worth is about making positive financial choices now that will pay off later. A few ways to get on the right track:

1. Prioritize debt repayment and savings: High debt balances, and especially debt with high interest rates, can get in the way of achieving other financial goals. Experts say developing good saving habits early and continuing to implement them as you age and earn more money can make all the difference.

“It can be easy for higher incomes to get swallowed up in mortgage and car payments, child-raising costs and to splurge on a few luxuries like a nice vacation and fancy dinners. Instead, it’s important to maintain the saving and investing disciplines that were established over the previous decade and even increase the percentage of income saved, if possible,” says Deer.

2. Entrepreneurship: Starting your own business can be a key driver of wealth, and some Gen Zers have already taken notice. A combination of 9-to-5 fatigue, unparalleled social media skills, and a heightened sense of social awareness drives Gen Zers to abandon traditional corporate work environments for their own start-ups. A 2022 survey by Microsoft found that more than 60% of Gen Zers have started — or plan to start — their own business.

3. Invest early: Some experts recommend setting aside between 15% and 25% of your after-tax income for investing, although this may look a little different for everyone. However, the sooner you start investing, even if it’s just a few dollars, the more time your money has to grow and work for you thanks to compound interest.

“The key is to establish good financial habits and disciplines that will help you build net worth for the rest of your life,” says Deer.

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