Members of Generation Z ages 18 to 25 in the US behave in distinctive ways when it comes to money, depending on where they come from. Unlike white US citizens, for example, Latinos are more likely to prioritize homeownership in the next year, according to a study by Bank of America.
Overall, the study indicates that Generation Z is more likely than other generations to combine financial ambition with the desire to live comfortably. Forty-five percent of respondents say that affording material goods is a motivation to be financially successful. But there are also those who feel guilt about overconsumption, and 29% feel remorse about acquiring luxury goods or material items in general.
That general view takes another path when looking at responses by race, ethnicity or gender.
According to the Bank of America study:
- Black/African American citizens are three times more likely to start a business in the next year, as opposed to white citizens
- More Hispanics (22%) will prioritize buying a home in the next year versus whites (14%)
- Women’s lack of financial literacy will negatively impact their economic well-being.
Homeownership as a synonym for success
For the Hispanic community, financial success is synonymous with homeownership, but the realization of this success is completed when the mortgage is paid off or the property is paid in full.
Unlike in other ethnic communities, family is the primary motivation for financial success. The possibility of leaving a home to their descendants is the strongest motivation for buying a house, even among the youngest.
However, the study shows that more than half of Generation Z Hispanics were not yet financially independent and still depended on their families.
Also, 57% believe that being able to provide for their family financially is part of financial success, and 64% said it is important to educate their family and community on financial matters.
The fact that they do not have financial training can be seen in the fact that 42% of the analyzed group does not have any investment due to lack of knowledge on how to make it.
The conditioning of the economic situation
Despite this age group’s ambition, inflation presents them with difficult decisions to reach their goals.
At the time of the survey, conducted between June and July 2022, two-thirds of this group of young people were actively saving. Despite this, 85% said they were experiencing various obstacles, the main ones being: the high cost of living; lack of sufficient income; and the economic situation. Thus, 40% of those surveyed said that the economic situation has complicated their savings plans.
Regarding the immediate effects they are suffering as a result of inflation, 42% said interest rates is one of the main factors of financial stress (8.5 as of July 2022). The impact of inflation is seen by 40% of respondents in rising rents and housing prices.
According to the Bank of America survey, rents are up 16% year over year for Generation Z, compared to only 3% for Baby Boomers.
Another plight of this group is that 47% have some form of debt, including credit cards and student loans.
Despite these challenges however, members of Generation Z are investing in their financial future and taking positive steps to strengthening their financial habits. More than half of respondents were optimistic about their financial future, and 77% have started saving or made an investment.