Gen Z is getting hit harder by inflation

Gen Z is getting hit harder by inflation

Gen Z is in a financial ditch.

A new study from credit reporting agency TransUnion finds those in their early 20s earn less, have more debt and see higher delinquency rates than Millennials their age.

The findings underscore the credit usage of Gen Zers ages 22 to 24. Millennials who fell into that age range in 2013 were asked about their credit use during that period. Gen Z is defined as those born between 1995 and 2012, and Millennials as those born between 1980 and 1994.

Generation Z, like Millennials, had to deal with economic disaster early in their careers. For Gen Z, it’s the Covid-19 pandemic. For Millennials, it’s the global financial crisis.

But the early-20s generation now has another challenge: sticky inflation that’s driving up the price of everything from gas at the pump to food at the grocery store. Interest rates, which are at a 23-year high, have also pushed up lending rates for car loans, student loans and mortgages.

This is not a problem unique to early career users. The overall US credit economy has seen higher levels of debt and delinquency across most credit products. A separate TransUnion report found that Americans’ total credit card balances will exceed $1 trillion for the first time in 2023.

But because Gen Zers are at the beginning of their credit journey, it’s important for them to establish healthy habits now that will help them down the road, experts say.

Before Bell spoke with Charlie Wise, head of global research and consulting at TransUnion, to discuss the financial situation of Gen Zers and what they can do to improve it.

This interview has been edited for length and clarity.

Why are we seeing that Gen Z is leveraging their credit more than their Millennial counterparts 10 years ago?

If you think about prices and the cost of living, most of the things we’ve seen go up are the things that Gen Z is most likely to spend the majority of their income on. Rent is a big part, and we’ve seen double-digit increases in rent over the past few years. But things like food, eating out, gas prices, prices for cars and transportation. All of them have seen significant improvement.

Most Gen Z consumers are not homeowners. They are renters or live with family or friends. But in the case where they’re renters, they see an additional bite that homeowners who own their homes before 2022 certainly don’t face. You own your home, your mortgage usually doesn’t vary, but your rent does. So I think that’s a big part of what has driven a lot of the financial stress that Gen Z consumers have seen.

Do you have any advice for Gen Z who may find themselves in a difficult financial situation?

One of the things consumers need to be aware of is that, yes, not everyone has the means to pay off their credit card in full every month. But the cycle of continuing to spend on your credit cards and only paying the minimum will create opportunities for you to continue accumulating debt. And it will take a very long time to pay off your credit card balance just by paying the minimum each month, especially if you keep using the card.

So, understanding what you can afford, what you can spend (is important). In some cases, consumers have very high levels of debt. An opportunity to refinance credit card debt with a cheaper form of debt. A personal loan is a good option for that. You have to make material payments every month, and consumers can consolidate their credit card debt into cheaper forms. Within a few years, they can pay it off. The key is not to use a personal loan to pay off credit card debt and then back up your credit card bill after you do.

Is it fair to say that there is cause for concern when it comes to Gen Z’s financial health, but the situation is more of a wait and see than a crisis?

I think that is a very correct assessment. Again, we’ve seen that the average credit card balance per consumer, is, even adjusted for inflation, 26% higher than they were for Millennials a decade ago. So these are consumers who are increasingly turning to debt. But even with the higher levels of delinquency we’re seeing, we don’t think this is necessarily cause for alarm.

Certainly with Gen Z users, they are potentially at a point in their career where they may see a relatively significant and rapid pay rise when they leave that first job, either promoted or take on (another) role in their organization or looking for a job new. jobs where they have increased income opportunities.

But at the same time … make sure again, you borrow and spend within your means.

UK emerges from recession in ‘fragile’ recovery ahead of election
The United Kingdom has emerged from a brief and shallow recession, giving Prime Minister Rishi Sunak a much-needed boost ahead of elections expected later this year, my colleagues Hanna Ziady and Anna Cooban report.

Gross domestic product rose 0.6% in the first three months of the year compared to the previous quarter, data from the Office for National Statistics (ONS) showed on Friday.

The increase followed a fall of 0.3% in the fourth quarter and 0.1% in the third quarter of last year. A recession is usually defined as an economic contraction of two consecutive quarters.

The expansion earlier this year was driven by “broad-based growth” in the dominant services sector, where output rose 0.7% in the quarter after falling late last year, the ONS said.

According to projections published on Thursday, the Bank of England now expects UK GDP to grow 0.5% this year, double the rate predicted in February. In comparison, last year, GDP increased by a meager 0.1%.

There are other signs that the economic outlook is brightening. In April, combined output in manufacturing and services posted the strongest increase in nearly a year, according to a survey of purchasing managers compiled by S&P Global. Again, service firms drive expansion.

However, compared to its peers, the UK economy is underperforming.

Next
Monday: Federal Reserve Vice Chairman Philip Jefferson and Cleveland Fed President Loretta Mester deliver remarks.

Tuesday: Earnings from Home Depot, Jack in the Box and Alibaba. The US Department of Labor released its Producer Price Index for April. The NFIB released its latest small business index.

Wednesday: Earnings from Cisco Systems. The US Department of Labor released its Consumer Price Index for April. The US Commerce Department released April figures on retail sales. The National Association of Home Builders released the NAHB/Wells Fargo Housing Market Index for May. Minneapolis Fed President Neel Kashkari delivered remarks.

Thursday: Earnings from Walmart, Applied Materials, Deer & Co and Baidu. The US Department of Labor reported the number of new applications for unemployment benefits in the week ending April 11. The US Commerce Department released April data on housing starts and building permits.

Friday: The Conference Board releases key US economic indexes for April.

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