Money Moves for Gen Z: 7 Tips for Financial Success

financial tips for Gen Z

Born between 1997-2012, Generation Z has grown up in an increasingly connected world of smartphones, Wi-Fi, and social media. They are also on track to be the most well-educated generation. However, as Gen Zers enter adulthood, they face economic challenges like increased living costs and a competitive job market.

According to a recent national survey, 68% of Gen Z say the current economic climate is hurting their ability to be financially independent and only half feel optimistic about their current financial situation. This may be because 74% of Gen Ze are worried about employment and job security, according to the latest Consumer Pulse Survey from McKinsey & Company. Other traditional markers of financial success, such as buying your first home, remain tough for the younger generation. Housing inventory is still low within the real estate market, the average interest rate on a 30-year fixed mortgage is close to 8%, and saving for a down payment can be challenging while also paying rent and meeting debt obligations such as car loans, credit card debt, and student loans.

The economic challenges for Gen Z are real–it’s not about coffee or avocado toast. However, learning personal finance basics such as budgeting, saving, managing debt, and more, can help you achieve financial stability and work towards long-term goals such as retirement. Keep reading to learn our best financial tips for Gen Z.


Stick to a budget

This is the first and arguably the most important step towards better money management and financial stability. There are a variety of budgeting methods to choose from, including app programs and spreadsheets, so you can try a few and discover what works for you. The budgeting process will help you get clear on the amount of money you have coming in and going out every month. You can track your spending and eliminate any recurring expenses that no longer serve you. Reducing spending frees up money for other goals, such as paying off debt or building an emergency savings fund.


Build an Emergency Fund

31% of Gen Z respondents don’t have any emergency savings, according to a recent poll. If you fall into this category, or the “some, but less than 3 months of expenses” category, you should put aside what you can each month to grow your emergency savings. Having an emergency fund isn’t just a financial cushion for the unexpected. It can also give you peace of mind and reduce your overall financial anxiety.

Set an initial goal, such as $500 or $1,000, that you can reach fairly quickly. Once you hit that mark, you’ll have a nice boost of momentum to keep going. Aim for an ultimate goal of at least three months of living expenses. Depending on your age and situation, you may need less or more to feel comfortable. For example, the oldest of the Gen Z cohort are turning 27 this year. This is young enough that many may not own homes or have families yet. In that case, you may not need as much of a cushion. The type of work you do is also a factor. How much job security do you have? How long would it take you to find another position if you got laid off tomorrow?

To make it as easy as possible to save, set up auto transfers from your checking account to savings once a month or on every payday. Then sit back and watch your emergency fund grow.


Build and Maintain Good Credit

Your credit score can open doors–or close them–when it’s time to apply for a loan, a new job, or a rental home. Beginning at age 18, follow these best practices for building and maintaining a healthy credit history.

Establish a credit file

  • Open credit accounts that report to the major credit bureaus, such as student loans and secured credit cards.
  • Ask your parents to make you an authorized user on their credit card.
  • Use tools like Experian Boost to add positive utility and cellphone payments to your credit report.

Building credit is essential to your future financial health. Your credit score can open doors – or close them – when it’s time to apply for a loan, a new job, or a rental home.

Make On-Time Bill Payments

Late payments can drag down your credit score. If you have trouble remembering different due dates, enroll in auto bill payments so you never miss a due date. You can also set up digital reminders for yourself a few days before a bill is due. Just remember that you still need to keep track of the money coming out of your checking account so you don’t incur an overdraft.

Manage past-due accounts

If you’re struggling to make loan or credit card payments, contact your lender. It’s better to let them know what’s going on and see if you can work something out than to stop paying. If multiple debt balances are tripping you up, it might help to consolidate them in one new personal loan.

Control revolving account balances

  • It’s best to pay off your credit card balance each month. Otherwise, you’ll incur costly interest charges.
  • If you do have to carry a balance at any point, try to keep it below 30% of your credit limit.
  • A higher credit utilization can lower your credit score.


Use Credit Cards Wisely

The Credit CARD Act of 2009 instituted a variety of new protections for cardholders, including special protections for young adults and students. Now, it’s harder to get a credit card before the age of 21. If you’re between 18-21, you’ll need a co-signer who is 21+ or proof of sufficient independent income.

Once you do have your own credit card, it’s important to understand how it works so you can use it wisely.

  1. Choose the right type of credit card for you. This could be a cashback card, travel rewards, 0% introductory balance, and more.
  2. If you do choose a rewards card, make sure you understand the redemption process and value of the rewards.
  3. Is there an annual fee? Many rewards cards have one. Consider whether you’ll get enough value from the rewards to make the annual fee worth it.
  4. Examine the Terms and Conditions, including the interest rate and APR and fee structure.
  5. Charge no more than you can afford to pay off every month. Once you get into credit card debt, it can be hard to get out due to high interest rates and compounding interest charges.

In addition to credit cards, you should be careful about using Buy Now, Pay Later financing to make online purchases. It can be easy to lose sight of the total charges and end up with more payments due than you can comfortably afford. With both types of financing, the most important thing is to never finance more than you can afford to pay off without interest.


Plan Student Loan Repayment

Student loan payments start a few months after you graduate or leave school. If you have federal student loans, review your repayment and consolidation options to potentially lower your student loan payments, including extended repayment periods or income-based plans.

Repayment terms for student loans typically range from 10 to 30 years, influenced by factors like interest rate, loan balance, annual income, and chosen repayment plan. Utilize the loan simulator on the Federal Student Aid website to find a suitable repayment plan for your situation.

If you can afford to, consider paying more than the amount due on your student loan each month. This will help you pay the debt off faster and reduce the total amount of interest paid.


Invest in Retirement Savings

No matter how young you are, it’s never too early to start saving for retirement. The sooner you start, the more time you’ll have to contribute to your retirement plan and grow your nest egg with compounding interest.

It’s never too early to start setting aside money for retirement. It may seem far off, but your future self will thank you for investing in financial security.

A good place to start is a 401(k) plan through your employer or an Individual Retirement Account (IRA). Both of these types of retirement savings accounts offer certain tax advantages and allow you to choose investments. You can set up recurring contributions from your pre-tax income, up to the annual limit set by the IRS. Just keep in mind that early withdrawals may incur penalty fees, as well as tax implications. This is why you should have an emergency fund as well as retirement savings.


Continue your financial education!

As you move through adulthood, your financial situation and needs will change. Make sure to continue your financial education throughout your life by listening to personal finance podcasts, reading books, and following blogs like our own “The First To Know” blog. If you have questions about your own finances, we are always here to help. Contact us or visit one of our Bucks County locations.