OH: Generation Z's future is bad but not bleak
Earning enough to make ends meet is subjective for everyone, but the average cost of living continues to rise due to inflation.
Although people have been adjusting to inflation since the early 1900s, Generation Z struggles to make ends meet.
A Bank of America survey found that 85 percent of Generation Z believes there are obstacles to financial success, and almost 50 percent feel behind in their financial goals.
Freddie Smith, a popular TikTok creator, regularly posts about Generation Z finances and believes that not even $74,000 is enough to cover individuals' average expenses in response to a Newsweek article.
"A bachelor's degree, $74,000 salary, you are splitting a two-bedroom apartment with a friend and only have $650 left a month — it would take you years to save up to $30,000 that you would need for a down payment on a house with the closing cost," Smith said. "But even if you could get that down payment saved, you would still need to make $120,000 a year to be considered for a $400,000 loan."
While Generation Z shared its uneasy feelings about finances, some financial experts disputed these anxieties, like Rachel Cruze, a co-host of The Ramsey Show, when she responded to Smith's viral TikTok video.
"What if you decided to get an extra job and pay off this debt? You would free up a car payment and free up $500 (of) student loans," said Cruze. "That's $900. $600 for groceries for a single person — I think you can do it at $500 … So, there is an extra $1,000, so that's really $1,600 extra. I think we're okay."
First, working a second job to pay off debt means $74,000 is insufficient, and you need more than $74,000 to be financially stable.
Second, the average American makes $58,563 annually, with the average New Jersey and Pennsylvania salaries being $58,722 and $51,278, respectively. This means that $74,000 is well above the national and state averages.
Third, even with $74,000 annually with a 30-year loan and no other debts to pay off, the most expensive home someone could afford is around $397,000. That number is still lower than the average price of a house in the U.S., sitting at $412,000.
Cruze is the daughter of Dave Ramsey, a personal finance advisor with a net worth of more than $200 million, so her outlook on financial stability differs from most.
Other experts, such as John Frehse, a labor force expert and senior managing director at Ankura, state that Generation Z is entitled.
"Gen Z is not a lazy generation, but it is an entitled generation because they have the freedom to make a broader set of decisions than older generations that have financial obligations. They're different," Frehse said.
From 1992 to 2022, the average sale price of homes skyrocketed from $119,500 to $433,100, while the median household income increased from $30,640 to $74,580. While median income grew substantially, the proportion of income relative to the price of homes is a lot smaller now compared to 30 years ago.
But Generation Z's finances are not as bleak as Smith's opinion and general statistics make them out to be. Graham Stephan, a real estate expert, believes that Smith's TikTok post sets unrealistic expectations.
"Even if you are disciplined and live very frugally, it's probably going to take three to 10 years to pay off all debts … That's why the average millennial buys their first home at age 34 compared to baby boomers at age 33," he said.
Stephan also noted that Smith fails to mention the income of couples. He said in 2021, census data found that 46 percent of home buyers were married, while single men and women bought homes at 22 percent and 30 percent, respectively.
Stephan also specifies that median household income depends on where you live.
"The median income in Newton, Massachusetts, is $122,000, while the median income in Flint, Michigan, is $25,000. This means there's going to be a lot of variance between average incomes, values and what middle class is in your area," he said.
Yes, Generation Z faces more financial obstacles than previous generations, but these challenges are not insurmountable. Every generation before Generation Z has suffered through some financial crisis, but they have been able to adapt and overcome economic challenges and support their own families during these difficult times. These problems Generation Z faces are nothing out of the ordinary, and it should not discourage individuals from pursuing their financial goals.
Jesse Oh is a junior in the School of Arts and Science double majoring in economics and journalism. His column "Get Your Money's Worth" is published every other Wednesday.
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