Younger Investors Are Optimistic About Their Finances, But Want Help

Friends sitting at a table looking at a laptop

Americans' dismay with the recent U.S. economy, despite the lowest unemployment rate in half a century, became the stuff of sundry new analyses in 2023 and continues into the election year. Yet younger generations are surprisingly optimistic about their finances, according to research from Bankrate.

Fifty-eight percent of Generation Z and 49% of millennials in a December survey thought that their personal financial situation would improve in 2024. That compares with only 33% of Gen Xers and 20% of baby boomers who shared this sentiment.

Bankrate also found that 37% of Gen Zers said their overall financial situation had improved since November 2020, compared with 25% of millennials, 19% of Gen Xers and 15% of boomers.

"The youngest workers in our society will always be among the most upwardly mobile, particularly when they possess the skills needed in the workforce when the economy is performing reasonably well," Mark Hamrick, Bankrate's senior economic analyst, said in a statement.

Reasons to Be Positive

Career advancement and a booming job market appear to be bolstering younger Americans' positivity. A November Bankrate poll found that younger American workers were more likely than older ones to have received a pay increase and/or found a better-paying job in the 12 months through October.

Moreover, younger workers who received a pay increase and/or found a better-paying job were also likelier than older workers who had done so to say that their incomes had kept pace with inflation: 47% of Gen Zers and 43% of millennials vs. 27% of Gen Xers and 24% of boomers.

Bankrate noted that young people's raises come faster than those of older workers, citing the Federal Reserve Bank of Atlanta's Wage Growth Tracker. Lately, this has happened even faster than usual.

At the height of the post-pandemic labor market boom, the youngest workers' wages grew more than twice as fast as those workers 55 and older, according to the Atlanta Fed. Even as the hiring blitz slowly cools, the youngest workers are still seeing their wages climb more quickly.

Another factor that is likely underpinning younger generations' optimism is that they are more engaged in personal finance, according to Bankrate.

Recent survey results showed that 76% of Gen Zers and 65% of millennials had sought financial advice during the previous 12 months, compared with 51% of Gen Xers and 46% of boomers.

Friends and family and social media were the preferred sources of advice for younger people. Still, 28% of millennials and 27% of Gen Zers reported that they worked with financial advisors.

Still in a Fragile State

Bankrate research shows that 32% of Gen Zers and 46% of millennials hold more credit card debt than emergency savings. In addition, 18% of Gen Zers and 12% of millennials report that they had no emergency savings in 2023 and have none this year.

The research also shows that 38% of Gen Zers and millennials feel they are having a harder time building wealth than their parents did at their age because of the economy.

Younger Americans today are struggling to pay off student loan debt, finance the purchase of a home and manage child-care costs. High inflation and expensive financing costs only exacerbate these issues.

But though they may not feel like their playing fields are equal, Americans' perceptions of money are closely tied to their parents, Bankrate said. Friends and family were the most common source that Americans turned to for financial advice last year, but even more so for Gen Z and millennials, at 44% and 36%.