Gen Z’s average net worth—and how they approach money differently from their parents

When it comes to building wealth, each generation finds themselves on a slightly different path, shaped by a changing economy, digital advances, and shifting cultural norms. The youngest and newest working Americans – Generation Z – are just beginning to make their mark and grow their own wealth.

Average Net Worth of Generation Z

Generation Z or Gen Z consists of people born between 1997 and 2012. The oldest members of this generation are turning 25 and actively participating in the workforce, becoming homeowners, starting families and starting their own businesses. The youngest members of this generation are just 10 years old.

Most Gen Zers are still at the very beginning of their wealth-building journey, due in part to the fact that many have not yet entered the labor market and those that do are not yet in their prime.

According to the Federal Reserve’s 2019 Survey of Consumer Finances, Americans under the age of 35 (a mix of Millennials and Gen Zers) have an average net worth of $76,000.

How does Generation Z’s wealth compare to other generations?

Compared to older generations, the average Gen Zer has little wealth. The average millennial over 35 is over $400,000. Those of Generation X have average net worths ranging from $400,000 to $833,000, and older generations, including Baby Boomers and the Silent Generation, have average net worths in the millions.

Check out this interactive chart on Fortune.com

It’s no surprise that Gen Z has the lowest average net worth of any generation, given that only a small number of them are employed and entry-level jobs typically have lower salaries. Lower incomes have led to lower savings and investment contributions. A recent report by Deloitte found that 46% of Gen Zers live paycheck to paycheck and more than a quarter of Gen Zers are not confident they will be able to retire comfortably. The typical annual salary for Gen Z workers varies from state to state, but the average across states was $32,500 in 2021, according to a recent study by GoBankingRates.

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Check out this interactive chart on Fortune.com

“For many people, the twenties are the time in their lives when they start working and possibly a new career. Your earning potential may be somewhat limited, making it seem difficult to build wealth this decade,” says Paul Deer, board-certified financial planner at Personal Capital.

Investing has also been shelved by many in this generation. Almost 40% have no investments and the main reasons for not investing, according to one bank, are not having extra funds to spare (44%), not knowing where to start (31%) and feeling that investments are too risky (23%). of America poll. The same survey found that while some Gen Z are prioritizing home ownership, which is often touted as the key to building wealth, the majority are reluctant to become homeowners due to rising home prices and rising everyday costs.

What Shaped Gen Z’s Wealth and Financial Future?

Several factors have played a role in this generation’s ability to build and grow their wealth. A combination of the economic downturn, record-breaking inflation, rising education costs and stagnant wages have all created significant obstacles to wealth creation.

Gen Z is still new to the workforce

Many Gen Zers are younger: half of this generation is under 18, two-thirds are still in school or college, and only a quarter of Gen Zers are of working age. Even for those who do participate in the workforce, they are likely still gaining traction when it comes to their professional careers and earning starting salaries.

“Millennials and Gen Z are earlier in the earning, saving and accumulating phase,” says Richard Bertain, a Pasadena-based financial advisor for UBS. “Saving seems patchy, and the habit of saving has not yet become a habit in many cases.”

The Great Recession set the tone for Gen Z money management

While the oldest Gen Zers were only pre-teens during the 2007-2009 recession, many still remember watching older siblings struggling to find jobs while paying off large student loans. As a result, studies show that while Gen Zers save less for retirement compared to older generations, they save a larger portion of their income. Gen Z saves an average of 20% of their income for retirement, compared to an average of 15% for Millennials.

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When it comes to setting financial goals, working Gen Zers who have not yet married or started families tend to prioritize more immediate goals, such as paying off credit cards, student loans, and building their emergency funds, rather than toward retirement save up.

Gen Z has more student loan debt than previous generations

According to an analysis by the Department of Education, cumulative federal student loan debt is $1.6 trillion and growing for more than 45 million borrowers. According to the Fed, Gen Zers have an average of $20,900 in student debt — that’s 13% more than Millennials. And 7.7% of Gen Zers have balances over $50,000.

As a result, some Gen Zers have put off major milestones like buying a home, starting a family, or investing for retirement. Certain policies such as the one-time student loan forgiveness program have given Gen Zers hope that they have more disposable income to fund future financial milestones, but not all student loan recipients will benefit from this program, and some Gen Zers have balances, that are well above the maximum forgiveness amount.

The COVID-19 pandemic is expected to have a long-term impact on this generation

For many Gen Zers, the pandemic ushered in the second major economic crisis of their lives, one that is still wreaking havoc on their personal finances and whose full impact has yet to be seen. A report by Georgetown University found that 25% of Gen Z adults (aged 18-23) who were already short on savings prior to the pandemic said they had either spent their savings or been saving or delaying debt repayment.

3 Ways Gen Zers Can Build Their Wealth

The good news: Gen Zers have time on their side. And building and maintaining a strong net worth is about making positive financial decisions now that will pay off later. A few ways to get you on the right track:

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1. Prioritize paying off debt and saving: Large debt balances, and especially high-interest debt, can get in the way of achieving other financial goals. Experts say that establishing good saving habits early on and perpetuating them as you age and make more money can make all the difference.

“It can be easy for increased income to be swallowed up in mortgage and car payments, child-rearing expenses, and a few luxuries like happy vacations and fancy dinners. Instead, it’s important to maintain the savings and investment discipline established over the past decade, and even increase the percentage of income saved when possible,” says Deer.

2. Entrepreneurship: Starting your own business can be a major wealth driver, and some Gen Zers have already taken note. A combination of 9-to-5 fatigue, unparalleled social media skills, and a heightened sense of social awareness is driving Gen Zers to abandon traditional corporate work environments for their own startups. A 2022 Microsoft survey found that more than 60% of Gen Zers have started their own business or plan to do so.

3. Invest early: Some experts recommend setting aside between 15% and 25% of your after-tax income for investments, although this might look a little different for everyone. But the sooner you start investing, even if it’s just a few dollars, the more time your money has to grow and work for you thanks to compound interest.

“The key is to develop good financial habits and discipline that will help you build wealth for the rest of your life,” says Deer.

This story was originally featured on Fortune.com

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