7 Signs Inflation Could Be Squeezing Gen Z Budgets to the Max
Building savings, paying rent and managing debt can be challenging enough on their own. But during an accelerated inflationary period? Hoo boy.
The latest consumer price index (CPI) report showed prices were 4.2% higher than a year ago, creating another obstacle for Gen Z budgets.
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Here are seven signs inflation could be squeezing them to the max.
1. Living Paycheck to Paycheck
One sign inflation may be squeezing a budget is when more of each paycheck goes toward rent and other essentials.
Bank of America researchers found that 42% of Gen Z adults are living paycheck to paycheck, and 17% say they are spending over half their checks on rent.
Recent inflation data helps explain why. The latest federal pricing data showed housing costs continued to rise in May, with rent increasing 0.4% over the month.
Higher rent prices make it harder to build savings, pay down debt or make progress toward other financial goals.
2. Delayed Savings Goals
Most financial experts advise consumers to save for emergencies.
While two-thirds of Gen Z adults are taking their advice, according to the Bank of America survey, inflation is making it harder to get ahead. The latest CPI figures reveal that overall prices continue to climb in recent months, by 4.2% in May and 3.8% in April.
When more money goes toward covering everyday purchases, it can become harder to reach savings goals on the original timeline.
3. Debating Every Purchase
Another sign inflation may be squeezing a budget is when every purchase starts feeling like a decision that needs extra thought.
Bank of America researchers found that most (92%) Gen Z adults still make room in their budgets for occasional splurges.
However, young adults also report experiencing financial stress and often call their parents or friends before pulling the trigger on a purchase.
4. Skipping Social Plans
Turning down plans occasionally is normal. But when the cost of dinner, drinks or entertainment starts driving the decision, inflation may be having a bigger impact than expected.
Rising entertainment prices could be a factor. According to the latest CPI figures, “recreation” prices were 2.6% higher than a year ago, while restaurant prices continued to climb in May.
However, Gen Z isn’t allowing rising prices to keep them down.
Seventy-five percent of Gen Z adults say they actively look for ways to save money when making social plans, choosing to order cheaper menu items, walk to events and eat or drink before going out (pregaming), according to Bank of America researchers.
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5. 'Loud Budgeting'
Not every invitation gets an automatic yes. For some Gen Z adults, protecting a budget means becoming more comfortable saying no.
Bank of America found that 42% practice “loud budgeting,” meaning they are open about what they can and cannot afford. Rather than stretching a budget to keep up with friends, many are choosing to be up-front about their financial limits.
Setting boundaries isn't always easy. But if conversations about affordability are becoming more common, inflation may be playing a role.
6. Passing on Dating
Dating has become a numbers game in terms of finances, not options.
Bank of America found that among Gen Z adults spending less than $50 a month on dates, 24% said they simply were not interested in dating, while 15% said they could not afford it.
Money can also affect what happens after a relationship begins. Nearly one-quarter of Gen Z adults said they have delayed moving a relationship forward because of their financial situation.
Choosing to skip dating is a personal decision. But when finances, rather than feelings, start influencing whether relationships move forward, inflation may be reaching beyond everyday spending decisions. Suddenly it feels like Gen Z doesn't get much of a decision in the matter at all.
7. Leaning on BNPL
Some Gen Z adults try to bridge the gap between paychecks by using buy now, pay later (BNPL) plans for everyday expenses.
About 40% of Gen Z has used BNPL services, but when it comes to everyday expenses, those costs can quickly compound out of hand and ability to calculate mentally. Be sure you're only using BNPL to defer costs with money already in hand — that way you're earning interest holding onto income a little longer. Groceries are usually the kind of expense people expect to pay for today, not over time.
Use BNPL for reliable, consistent costs that are already baked into your budget. Counterintuitively, larger costs (especially recurring ones) can be more favorable than smaller ones, as larger purchases are fewer and more memorable. They'll stick in mind for easier tracking. However, be very careful about securing favorable terms; BNPL for rent in particular is guaranteed to benefit the lender more than you.
Only use BNPL agreements whose models are designed to make money off people not paying off in time — and then pay them off religiously. Move that money out of reach to a high-yield savings account the second it's committed to a BNPL purchase.
Bottom Line
A 4.2% annual inflation rate may sound like an economic statistic, but it often shows up in everyday decisions about spending, saving and socializing.
Not every sign on this list is cause for concern. However, recognizing how inflation is showing up in daily life can make it easier to respond before a temporary budget squeeze becomes a bigger financial setback.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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