Young Americans May Face A Financial Future Less Fortunate Than Their Parents (2024)

FAQs

Why are young people struggling financially? ›

More debt than their parents

Having a college degree is linked with higher lifetime earnings, as well as other financial benefits, yet it also comes with a downside: More young adults have student loans than their parents did at the same age, the analysis found.

Ultimately, with inflation taken into account, the majority of Americans are worse off financially compared with before the start of the pandemic. The Federal Reserve aims for a 2% annual inflation rate but has yet to bring inflation back down.

A new study found that 80% of Americans between the ages of 18 and 34 are struggling or merely surviving financially.

Among the key findings: 45% of young adults say they are completely financially independent from their parents. Among those in their early 30s, that share rises to 67%, compared with 44% of those ages 25 to 29 and 16% of those ages 18 to 24.

According to the survey, 57% of young adults also live with their parents or in a parent's home. The economic challenges posed by high housing costs, inflation and broader economic precariousness have made it difficult for many young adults to afford living independently.

The cost of university fees and the general cost of living are weighing heavily on the minds of young adults. In a 2022 Harvard study [PDF] of more than 1,800 people aged 18 to 25, more than half of respondents reported that financial worries (56 percent) were negatively impacting their mental health.

The majority of Americans are struggling to save.

A new Bankrate poll found over half of American workers (53 percent) say it's difficult or impossible to consistently save enough money to feel comfortable for emergencies, retirement or any other reason, given their current financial situation.

Low-income areas are often economically isolated. There is less business development, therefore less retail competition. The only choices in shopping for groceries, clothing, medicine, furniture and other household necessities may be smaller stores that lack the economy of scale to offer discount prices.

According to a recent CNN survey, 71% of Americans identify money as a significant cause of stress in their lives. Further, 76% of households live paycheck-to-paycheck and credit card debt is growing.

It may be that you have too much credit card debt, not enough income, or you overspend on unnecessary purchases when you feel stressed or anxious. Or perhaps, it's a combination of problems. Make a separate plan for each one.

What is the biggest financial problem in America? ›

WASHINGTON, D.C. -- For the third year in a row, the percentage of Americans naming inflation or the high cost of living as the most important financial problem facing their family has reached a new high. The 41% naming the issue this year is up slightly from 35% a year ago and 32% in 2022.

According to a recent Ramsey Solutions study, 34% of survey respondents indicated that they were either facing financial struggles or were actively in crisis. That's a huge percentage of people -- more than one-third of all respondents -- who are not feeling good about their personal finances.

If you start early enough—say, in your 20s—and follow the steps listed above, you may become financially secure by the time you reach your 30s. If you're older, all isn't lost. You can still reach your financial goals as long as you have a plan and adhere to it.

By age 35, aim to save one to one-and-a-half times your current salary for retirement. By age 50, that goal is three-and-a-half to six times your salary. By age 60, your retirement savings goal may be six to 11-times your salary.

The answer, according to neuropsychologist William Stixrud and teen coach Ned Johnson, authors of The Self-Driven Child, is to hand the decision-making reins over to our teens. You read that right: By adolescence, we parents need to (take a deep breath and) let them make their own decisions about their lives.

Gen Zers face greater obstacles to financial success

Not only are their wages lower than their parents' earnings when they were in their 20s and 30s, but they are also carrying larger student loan balances.

As young people have not had time to build good credit, they typically face high interest rates and a limited ability to borrow. They are unable to save. Given their modest financial resources, young people often find it difficult to build savings and may accrue credit card debt to pay for bills or emergency expenses.

Unexpected costs, for example, medical bills. Failed investments or business ventures. Problem gambling. Lifestyle choices, for example, overspending or living beyond your means.

Most people, even in their mid-to-late 20s are still struggling to establish themselves. That can be hard to do if your job isn't paying you enough, you're struggling to make rent, have no savings, and are being crushed by debt.