Those in the Gen Z age bracket are known for their ambition to work hard and save early, unlike preceding generations. Yet, they face challenges arising from their spending habits, common among young adults in America. Surveys highlight the pervasive worry about the cost of living, with a July poll indicating that 95 percent of Americans perceive an ongoing affordability crisis. Gen Z, comprising those born between 1997 and 2012, seems to delay saving for significant milestones like homeownership. Nonetheless, they actively participate in the nation’s consumption-driven economy.
The Bank of America Institute’s recent report identifies Gen Z as having the “lowest savings-to-spending ratio of any generation.” This suggests higher monthly spending relative to savings. However, the bank’s payment data shows an increase in discretionary spending among Gen Z. Areas such as coffee, beauty, and travel are focal points, reflecting a preference for immediate gratification and contribution to what Bank of America terms the “little treat economy.” This spending pattern is observed across all income brackets within Gen Z, diverging from the “K-shaped” economic divide seen in other groups.
Savings Goals and Spending Habits
Despite affordability issues and a penchant for small luxuries affecting budgets, Gen Z remains committed to saving. Bank of America notes that nearly two-thirds (66 percent) of this generation are now saving, a rise from 60 percent in 2024. Survey results from earlier this year reveal that 36 percent deposit leftover funds into savings, 22 percent invest in a 401(k), and 21 percent allocate a specific portion of their paycheck into a savings account monthly.
Parallel to these saving efforts, the trend of “loud budgeting” has gained traction, involving transparent financial goal-setting and spending limits to normalize budgeting and living within one’s means. Approximately 42 percent of Gen Z engages in this practice according to Bank of America.
The 2026 Workplace Benefits Report from Bank of America highlights that Gen Z is beginning to save for retirement a decade earlier than baby boomers and feels about 5 percent more confident in their ability to retire comfortably.
Managing Affordability Challenges
Bank of America reports that discretionary spending per Gen Z household has been rising since March 2025, suggesting affordability pressures have not entirely deterred this generation from non-essential purchases. Nonetheless, a separate May survey finds 42 percent of Gen Zers live paycheck to paycheck, which increases to 73 percent for those with annual earnings below $50,000.
Furthermore, a June poll conducted by Simon-Kucher reveals that 51 percent of Gen Z are willing to forgo long-term financial goals, such as saving for a home, to enhance their current quality of life. This stands in contrast to only 22 percent of baby boomers, while millennials also share similar tendencies.
Interestingly, 25 percent of Gen Z respondents have one or more income sources to support their spending behavior. The Bank of America Institute recently noted a surge in gig workers among Gen Z, suggesting younger individuals seek additional income avenues.
For further information on this story, please contact Newsweek editors Daniel Orton and Sam Wilson.