Gen Z Facing Mighty Struggle with Cost of Living Increases

In the last few years, we’ve seen price increases that no one has experienced for decades. This hyperinflation environment affects millions, especially the younger generation. The struggle comes face to face with Gen Z, many of whom are entering the workforce for the first time. Their careers and lives are affected significantly, as the world hasn’t caught up to the higher cost of living.

What is Inflation?

Inflation refers to the purchasing power of a currency. The most common way we identify this is by comparing it with the cost of goods and services. Over time, the price of these things tends to increase steadily compared to the currency. The standard rate is around 2%, meaning prices go up 2% annually, more or less.

However, inflation in the past year is now at around 8%, the highest since the early 1980s. That means that many countries are in a state of higher inflation. It takes more money to buy the same amount of goods, 8% higher than they were a year ago.

Several reasons caused this scenario though no one factor has been a major contributor. One of the most notable things to identify is the pandemic. 2020 saw many businesses shut down, lowering the price of goods as demand for almost everything waned. There was a shock to the supply chain, and as countries are now recovering, industries are having trouble trying to catch up.

Another reason is the government’s Covid-19 relief support. Many countries began printing money, providing monetary support to those in need. The more money circulated, the weaker their purchasing power became. The effect of printing money has consumers ready to buy more, but with a weakened supply, the price pushes up as a result.

One of the latest to affect the world’s financial situation is the struggle between Russia and Ukraine. While it may seem like countries far from many, these two countries contribute greatly to the world economy, especially oil (energy) and grains (food), two of the products most affected by inflation. The political issues there resulted in increased prices of goods exported globally. It makes it harder for people to get goods because the supply from these areas has been cut significantly.

The Harsh Truth About the Gen Z Cost of Living

Because of the environment, most Gen Z workers cannot get into a comfortable state of living. Everything is expensive, from mortgages to groceries. Around a quarter of all Gen Z are having trouble saving money, with many going to obligations and debt, and many of them resort to living with their relatives for the time being. They’re looking for solutions that can move them faster than the rising inflation rate.

Over 30% of working Gen Z use almost half of their paycheck towards rent on the mortgage. That’s an estimated 10% increase from a few years back. It doesn’t help that the average household income has stayed low. There aren’t enough opportunities for them to have more because most jobs still pay the same.

Many of them dream of living outside their homes and striking out on a life of their own. They believe they can have enough money to live a comfortable lifestyle for now. However, reality catches up fast, and those who don’t plan their money well tend to have little to none. It comes close to a lifestyle of living paycheck to paycheck.

What About the Future?

Because of the current environment, many Gen Z are also considering if this is their fate for the immediate future. Gas costs are near all-time highs, breaking numbers they never reached five years ago. Many feel like they’re in an environment where work is necessary, and life has to revolve around it. Those who took loans within the last five years also have concerns because the pandemic has limited income-earning opportunities.

Inflation is a source of stress and anxiety for them. The typical solution seems to be staying in family homes in the meantime to reduce living costs. However, it isn’t ideal as many want to be independent of their parent’s homes.

Those venturing into business consider all possible options to maximize their profit. Businesspeople need to scrutinize where their capital is going and whether each step provides returns. The alarming increase in the cost of things like gas and general goods has set many back, causing others to increase prices as well. It’s a domino effect that people are now feeling.

We see a shift in the behavior of Gen Z because of the concern for the future. People are now looking for ways to outpace inflation. You’ll see how the behavior has shifted recently:

• More Gen Zs are looking at volatile or nontraditional investments as they have the potential to bring in more returns.

• Gen Zs are now looking for jobs, away from the traditional 9 to 5 corporate setting.

• Gen Zs are looking for more opportunities to work for themselves to maximize their income. As such, you’ll see people who’ve gone on to become content creators, run online businesses, or work as freelancers.

• The newer generation is becoming savvier when it comes to their financial decisions and investments.

Saving and Spending Troubles

As more money is necessary for funding the usual lifestyle Gen Z has, they’re saving little in comparison. While over half of them are still able to put money in the bank, the average Gen Z worker is only able to save around a month’s worth of expenses. Others believe they aren’t getting enough money and their work cannot keep up with inflation.

Apart from that, the rising prices also mean they’re spending more now. Only a quarter of Gen Z believes that their spending has not changed. It has led many to dial back their budgets and reexamine where they’re putting money.

As a result, we also see higher demand for some goods but waning demand in others as priorities shift. People focus on necessities first as opposed to the height of the pandemic when people had more money to spend because of low inflation.

As Zoomers are now transitioning to adulthood, they understand that there is a cost to each milestone they achieve. The good news is that the job market is recovering, and many industries are adjusting to accommodate the new environment.

Gen Z Cost of Living: A Lack of Financial Education

Another development that occurred within the past year is that more Gen Z influencers have risen to fill a gap. Most of the financial knowledge to survive these hyperinflated times wasn’t available back then. As such, people are now looking for solutions from their peers. You find more searches about:

• How to eliminate debt

• How to save money

• Getting passive income

• Investing

• And many more

Focusing on finances after school would benefit the new generation greatly. They’ll be able to enter the workforce knowing what to do with their budget. They’ll understand how to handle debt, savings, and the like. For now, most will have to settle with learning as they go while they’re traversing adulthood.