Depressing Survey Finds Gen Z Financial Crisis Worse Than We Thought

As Gen Z grows older and slowly enters adulthood, a startling statistic has emerged - nearly one-third of Generation Zers, comprising those born between 1996 and 2012, find themselves unable to afford independent living and are still residing with their parents. In fact, last year marked the least affordable home-buying year in over a decade, presenting significant hurdles for young adults striving for independence.

31% of Gen Z can’t afford to leave home

A staggering 31% of Gen Z adults are currently living with their parents due to financial constraints, shedding light on the formidable challenges the generation faces in securing independent accommodation. 

The data comes from a comprehensive report by Intuit Credit Karma, based on a survey of 1,249 individuals aged 18 and older. The implications of this trend extend beyond individual financial struggles, impacting family dynamics and overall economic patterns. 

Even many who have left the nest are struggling to make their rent payments. The same report says 38% of those who have left are going without necessities because they need help paying rent each month.

What's causing Gen Z to struggle?

The struggle for housing affordability is a pervasive issue cutting across generational lines. As revealed by the Pew Research Center, the number of households with two or more adult generations has been steadily increasing, with 25% of young adults now living in multigenerational households. This is a substantial rise from 9% only five decades ago. 

The primary driver behind families doubling up is finances, with mounting student debt and soaring housing costs forcing people to rethink their living arrangements. Gen Zers have also had the misfortune of growing up during a particularly difficult economic period. 

Many were either growing up or born during the Great Recession, and the majority of Gen Z has lived their young adult lives in the direct aftermath. Tack on the COVID-19 pandemic, soaring inflation, high prices, and competitive housing markets and it is easy to see why this Generation finds it difficult to get ahead financially and why they might experience failure to launch.

The future outlook for Gen Z

As Gen Z grapples with the least affordable housing market in years, their future outlook remains uncertain. The average rate for a 30-year fixed-rate mortgage hovers around 6.6%, presenting a considerable barrier for potential homebuyers — especially young Gen Zers and millennials just starting out looking for their own real estate. 

While expectations of rate cuts from the Federal Reserve may bring some relief, the challenges of low inventory and escalating home prices will likely persist. The financial struggles faced by Gen Z extend beyond housing, with the burden of financial dependence on parents looming large. 

Understanding the future trajectory of this generation requires a holistic look at economic indicators, societal shifts, and potential policy interventions.

Reliance on parents

Beyond the housing market challenges, another revealing aspect is the financial dependence of Gen Z on their parents. According to a survey by Experian, over half of Gen Z adults and millennials are financially reliant on their parents. The economic benefits of multigenerational living, as highlighted by Pew, present a complex perspective. 

While those who double up to split costs and financially support each other with multiple generations in the same house benefit, the root cause of needing (versus wanting) to live with parents is troublesome. This dependence poses a significant drain on parents' financial security, raising questions about the broader economic implications of supporting grown children.

This arrangement puts an uneven weight on parents. Pew states that the typical 23- to 34-year-old who lives with their parents, or other family members, contributes only 22% of the total household income. This puts an additional strain on parents and other relatives who are nearing retirement and need to consider their own financial needs.

Should the trend continue, it has the potential to reshape our housing market and force banks and policymakers to rethink how things are done. It's an issue that many may not see as something relating to them, but it actually could impact everyone's financial outlook moving forward.

Bottom line

The struggle of Gen Z to afford independent living is a symptom of broader economic challenges and shifting societal norms. The least affordable home-buying year, coupled with unique financial hurdles for this generation, demands attention from policymakers, businesses, and society as a whole. 

The economic interdependence of generations, while presenting challenges, also offers opportunities for innovative solutions and collaborative approaches. As we navigate these complexities, it becomes important to recognize the complex nature of housing affordability issues and work toward sustainable solutions that ensure the financial well-being of current and future generations.