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If you are a member of Generation Z, chances are good that your savings account is not exactly overflowing with extra cash.
Among those who are currently between the ages of 14 and 29, the average savings is just $1,804, according to a survey of more than 2,000 adults by credit-building company Self.
Find out why members of Generation Z are so poor and what they should do to keep more cash in their pocket.
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They are young
There are many reasons why members of Generation Z have such paltry savings. But perhaps the most important factor that has kept them from accumulating large stores of cash is simply that they are so young.
Since the dawn of time, young people have always been less wealthy than their elders. This makes perfect sense. Not only have older savers had far more time to accumulate a hoard of cash, but they also have the skills and experience to land the best-paying jobs.
The oldest members of Gen Z have not even celebrated their 30th birthday. Many are still in college, and some have not even graduated from high school. Many members of this generation eventually may become rich. But for now, they simply need more time.
Their student loan debt is growing fast
The story of Generation Z and student debt is a mixed bag. Among all generations, Gen Z actually has the lowest average student loan debt balance, at $21,670, according to the Education Data Initiative.
However, even though the overall average total is relatively low, average student loan balances are growing faster for Gen Z than for any other generation.
Members of Generation Z who struggle to pay off student loans are unlikely to save much.
The cost of living is rising
Whether they realize it or not, those in the Generation X and millennial cohorts both were fortunate to come of age in a time when inflation was low.
The trend of low inflation is now over, at least for the time being. In recent years, prices have risen at a pace not seen in decades. Members of Generation Z are feeling the full brunt of those rising costs.
When costs are high, it's tough to save money.
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They are turning to credit cards
In a recent 12-month period, 25% of Gen Z adults with a FICO score opened at least one credit card account, according to FICO.
That was the highest rate of any age group.
FICO says members of Generation Z are turning to credit cards out of necessity and using them to help make ends meet. In fact, nearly 40% of Gen Zers admit to opening accounts so they have a financial cushion. Many folks in Gen Z are concerned with just getting by. In that context, saving money would have to wait until later.
A ray of hope for Generation Z
Although some members of Generation Z are struggling now, the future looks surprisingly bright thanks to how diligent they are about saving for retirement.
The average member of Gen Z is beginning to save for retirement at age 22, according to a Northwestern Mutual survey. For comparison, that is a full decade ahead of when their Generation X predecessors started to save.
When you save early in life, it gives your money more time to compound. This has an enormous impact on how large your nest egg is by the time you retire. Even saving and investing relatively small amounts early and often results in large sums if you give the process enough time.
Tips for saving more
If you are a member of Generation Z who has not saved much money, there are several things you should do to kickstart the process. Landing a part-time job or starting a side hustle provides you with the additional income you need to save.
Once you have some savings, either invest the money in stocks and bonds or park it in a high-yield savings account. Automating the process of saving also makes it easier to build a pile of cash. If your workplace has a 401(k) plan, talk to someone in human resources about how to sign up so money automatically moves from your paycheck to your account.
If you have a high-yield checking account, see if it is possible to get a portion of your paycheck directly routed into that account.
Bottom line
It is never easy to build savings when you are young, and members of Generation Z are facing extra challenges that earlier generations did not.
However, there are still plenty of ways to increase your savings if you are determined to do so. If you are ready to save more, start investing and cut back on unnecessary spending. A richer future awaits.
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