Financial Building Blocks for Millennials and Gen Z

5 MIN. READ

 

Key takeaways:

 

• The 2008 crisis and the COVID lockdown affected young adults who entered the workforce during these events.
• Millennials and Gen Z are navigating a world with stagnating wages and high housing costs, especially in South Florida.
• There are financial strategies young adults can use to build a better future.

For Millennials and Gen Z, reaching financial milestones can be challenging.

Both generations entered the workforce during a major economic crisis, and this has shaped their careers and earning potential. We’re here to look at how the economy has changed things for young adults and share some financial tips to help Millennials and Gen Z build a strong financial future in spite of these challenges.

From the 2008 Crisis to the COVID Pandemic

Millennials and Gen Z have one thing in common: Both generations came of age during a major economic recession.

How Did the 2008 Crisis Affect Millennials?

Millennials entered the workforce during the 2008 crisis, which had a profound impact on their finances:
 

• Entering one of the worst job markets in history was challenging. It meant lower starting salaries and stagnating wages during the years that followed.
• Millennials also experienced a lack of stability early in their careers. This created setbacks and delayed milestones like moving out.
• This generation stayed in school longer due to limited prospects on the job market and racked up student debt.
• Due to the large number of foreclosures on the real estate market, many properties were turned into rentals. This reduced the available housing stock and is still to this day making homeownership difficult for young adults.

Living through the 2008 crisis taught Millennials to be cautious with their finances. Many prioritize saving, but they also experience financial anxiety at a higher rate than older generations.

Gen Z and the COVID Lockdown

For Gen Z, the COVID pandemic had a significant financial impact:
 

• Many young adults suddenly lost their job or saw their hours reduced during the lockdown, especially in service industries where Gen Z is overrepresented.
• Internships, entry-level roles and other career-building opportunities were delayed or canceled, making it harder to gain early experience.
• Online learning and remote work have had a negative effect on networking opportunities for young adults.

Inflation has been affecting everyone following the pandemic, but young adults are particularly vulnerable due to stagnating wages.

Growing up in a digital world has helped Gen Z develop a certain resilience to these challenges. These young adults are more likely to turn to side hustles and online income streams to diversify their earnings. 

They’re also using online sources to learn about money, especially when it comes to investing.
 

Financial Building Blocks for Millennials and Gen Z

Strong financial habits can help young adults deal with challenging economic conditions and create long-term stability.

Start With a Financial Safety Net

Young adults are particularly vulnerable to financial emergencies, like an unexpected bill or sudden job loss.

Creating a financial safety net should be a priority:
 

• Ideally, you should have a savings account with enough money to cover essential expenses for three to six months.
• Start small if needed. Even setting aside a small amount each month can build momentum over time.
• Keep this fund in a separate, easily accessible account to avoid dipping into it for everyday spending.

For many young adults, parents and older relatives can be a source of support during an emergency. Have this conversation before finding yourself in need of money, so you have a realistic idea of the kind of support available to you.

Look for Flexible Income Streams

Part-time work is a great way to make a little extra money that helps trim down debt or pad a savings account. There are multiple ride-share apps and food delivery apps that allow you to work when you want and as much as you want. If you have a particular skill set, like writing or computer work, you can always look for ways to contract out those skills to make a little extra money.

Be Strategic With Debt

Taking on debt can delay financial milestones, but young adults may not have a choice when it comes to borrowing money for school or charging unexpected expenses to a credit card.

The key is to have a solid debt repayment plan in place and a budget that prioritizes debt payments:
 

• Pay high-interest debt down first to reduce long-term costs.
• Avoid taking on new debt as much as possible, unless it supports career growth and gives you access to a higher income in the future.
• Explore repayment options, such as income-driven plans, debt consolidation or refinancing, to make existing debt more manageable.

Invest Early, Even in Small Amounts

Investing can feel intimidating, but starting early makes a real difference over time, even if you can only afford to invest a little each month.

Create an investment habit for a better future:
 

• Contribute consistently, even if it is a small percentage of your income.
• Look for a job with an employer-sponsored retirement plan, especially if there is a matching contribution.
• Use beginner-friendly investment platforms to get started and build confidence.

Budget With Rising Costs in Mind

With inflation driving up the cost of everyday essentials, budgeting can feel challenging.

Leave some breathing room in your budget to account for rising costs:
 

• Track your expenses regularly to understand where your money is going.
• Living below your means gives you a little bit of room as prices go up.

Adopting a realistic budget can mean delaying milestones like moving out or making some changes to your lifestyle, like prioritizing public transit over owning a car or sharing living expenses with roommates.

Prioritize Financial Education

The more you know about money, the more confident you’ll be about planning your future. We recommend learning about concepts like budgeting, credit score, investing and saving.

Be cautious with trends and advice you find on social media, and prioritize trustworthy sources instead, like financial institutions, government resources and reputable experts.

Making important financial decisions is easier if you have a solid understanding of financial concepts. Power Financial Credit Union has many financial literacy resources and a blog to help you learn about these important concepts.
 

Bank With a Credit Union

Banking with a credit union can help you save money thanks to lower fees, while giving you access to all the banking products you need to manage your finances.

At Power Financial Credit Union, we offer a variety of services, including personalized banking advice. We also have savings accounts with competitive interest rates, solutions for consolidating debt and a lot more.

Stop by one of our South Florida branches to learn more or send us your questions online.
 

FAQ

What financial challenges do Millennials and Gen Z face today?

Millennials and Gen Z are dealing with stagnating wages, rising living costs, and high housing prices. Many also entered the workforce during economic downturns, which affected their earning potential and career growth.

Why is it harder for young adults to buy a home?

High home prices, limited housing inventory, and rising interest rates have made homeownership less accessible. In areas like South Florida, affordability is a major barrier for first-time buyers.

How much should young adults have in savings?

A common recommendation is to save enough to cover three to six months of essential expenses. However, starting small and building consistently is more important than reaching that goal immediately.

Are side hustles a good idea for young adults?

Yes, side hustles can provide additional income and financial flexibility. Many young adults use freelance work, gig apps, or online opportunities to supplement their primary income.

How can young adults manage debt effectively?

Focus on paying down high-interest debt first, avoid unnecessary borrowing, and explore options like consolidation or income-driven repayment plans to make debt more manageable.