Gen Z consumers cut back on spending, pessimistic on economy's rebound

A large majority of Gen Z reports changing spending habits to save money in the current inflationary period.

Nearly three-quarters (73%) of Gen Zers say they've altered their spending habits in the past year, including by cooking at home more frequently (43%) rather than dining out, spending less on clothes (40%) and limiting grocery purchases to the essentials (33%), according to Bank of America’s most recent Better Money Habits survey. An even higher number (85%) of Gen Z reported having “one or more barriers” to achieving financial success.

The vast majority of Gen Z respondents who adopted the three reduced spending habits plan to maintain them over the next year (90%, 79% and 80%, respectively). Just 24% of those surveyed reported confidence that the economy will improve, compared to 41% in 2021, while 32% felt confident the job market will improve, compared to 46% in 2021.

"This younger generation has proven resilient and resourceful in managing their money during a challenging environment, and adapting their lifestyles as needed," said Holly O'Neill, president of retail banking at Bank of America. "We continue to provide a wealth of resources and the guidance they need as they work toward financial independence and on building wealth."

Over the last year, nearly four in 10 Gen Z respondents (37%) said they've experienced a financial setback, such as decreased savings or additional debt. As a result, 27% reported having to borrow money from friends or family. More than half (56%) say they do not have enough money saved to cover three months of expenses in the event of an emergency.

Bank of America found that while just over half of Gen Z respondents (52%) felt confident that they're on track to meet their financial goals, fewer than half (48%) are fully or even mostly financially independent.

The majority of Gen Z respondents felt confident in their ability to manage day-to-day expenses (69%), manage their budget (70%) and their credit (67%). However, they reported a lack of confidence around more complex financial planning topics, such as feeling equipped to save for retirement (45%) and investing in the stock market (29%).

Looking ahead to 2024, the report found that Gen Z's top priorities include furthering their education (36%), advancing their career or increasing their salary (31%) and getting a new job (31%). 

This year, many Gen Z started a new job or took a new position (33%), negotiated a raise (22%) or applied for a job in a new field (14%).For those that started a new job, they were motivated by higher salaries (36%), better long-term prospects (32%) and saw a new role as a step up (32%).

Bank of America’s survey was based on nationally representative probability samples of 1,156 general population adults (age 18 or older) and a partially overlapping sample of 1,167 Gen Z adults (age 18-26), including 122 Gen Z adults from a non-probability sample.