4 in 10 Gen Zers Are Worried About the Economy. Here’s How to Prepare

Two young adults in casual wear use their gadgets and a pad of paper to discuss finances.

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There are ways to reduce the stress of a looming recession.

Important points

  • 42% of Gen Z cite the economy and high inflation as the top financial stressors.
  • 73% of Gen Z say the economic climate has made it difficult to save money.
  • No matter what generation you’re from, you can prepare for a potential recession by putting money in your emergency fund, paying off debt, and setting a budget.

A recent Bank of America (BoA) survey showed that the economy and high inflation are the top financial stressors for 42% of Gen Zers. Almost three-quarters say the current economic environment has made saving more difficult, and more than half say it has caused additional financial stress.

It’s not just headlines about a possible recession that are worrying people. It’s also the fact that so many aspects of life have become more expensive. From rent to groceries to gas, prices have been rising for quite some time. And the latest data shows that those price hikes aren’t going away.

Gen Z and the economy

Many Gen Zers say inflation makes it harder for them to meet financial goals like saving and paying off debt. The latest consumer price index shows that prices are up about 8% year-on-year, with the cost of housing, food and medical care rising significantly.

In fact, 40% of 18-25 year olds surveyed said they are struggling to pay for basic necessities due to the huge increase in rent or housing costs. Additional BoA research shows younger consumers are hit hardest by rent increases. In July, the average rent payment for Gen Z rose 16% year over year, compared to just 3% for baby boomers.

Higher living costs have also prompted some Gen Zers to look for new jobs. Others have taken on part-time jobs or turned hobbies into part-time jobs in order to generate additional income. Almost 60% of respondents said the high cost of living was a barrier to financial success.

This is how you prepare for difficult economic times

High prices and economic uncertainty affect us all, no matter what generation we belong to. Unemployment is low at the moment. But if we enter a recession, there’s a chance companies will cut back and people will lose their jobs. Here are three ways to prepare it:

1. Set a budget – or update your budget

If you already have a budget, it might be a good time to double-check the numbers. The cost of living has changed a lot and your expenses may have increased in the last few months. If you’re not on a budget, you’re not alone. Many people push budgeting so far down their to-do list that it always gets put off for another day. But do your budget day today.

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Try to think of a budget as something constructive and not scary. That means you know how much you can spend and how much you need to save. If you don’t know where to start, there are some great budgeting apps out there. Once you know what you’re spending and what you’re earning, you can start recession-proofing your finances.

2. Top up your emergency fund

An emergency fund is like a big adult security blanket. It offers you some protection against a serious financial problem, such as a medical crisis or losing your job. Many experts recommend saving your living expenses for three to six months in a separate emergency savings account. But with a looming recession, some — like Suze Orman — suggest accumulating enough cash to last 12 months. Every extra dollar you can put into your emergency fund today will help you when the economic situation worsens.

3. Pay off debt

If you have high-interest credit card debt, pay off as much as you can. Easier said than done, especially if you’re already financially strapped. But if interest rates rise, the cost of holding debt will rise. Plus, if you lose your job, you’ll still have to make at least minimum payments on that debt — money you could otherwise use to keep a roof over your head and food on the table. It’s not reasonable to hope to get out of debt overnight, but you can make a plan to achieve that goal.

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bottom line

It’s been a difficult few years, but we’re not over the hill yet. Every generation struggles with rising living costs and economic uncertainty. Look for ways to cut costs, make savings, and pay off high-interest debt. Unless we hit a recession, you’ll have money in the bank to fund something fun or ready to invest in your future. If we do that, you will have a financial cushion to bridge the gap.

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