Middle-Class Gen Zers vs. Boomers: Who’s Struggling and Who’s Thriving?
Written by
Gabrielle Olya
Edited by
Molly Sullivan
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Overall, the middle class has been faring well in recent years, according to a new Bank of America study. The study found that average wage growth is up 3.1% year-over-year for middle-income households, and spending is up as well, with spending growth for middle-income households up around 2% year-over-year.
However, there are some discrepancies when the data is broken down by age. Here’s a look at which middle-income households are struggling, and which are thriving.
Boomer Middle-Income Households Are Faring Better Than Gen Z
While spending is up for middle-income households overall, a closer look at the data reveals that some are spending more for pleasure, while others are spending more out of necessity.
In February, Gen Z middle-income households saw higher growth in total spending compared to their spending on discretionary items, meaning they are spending more on needs. But for boomers, discretionary spending growth was greater than their growth in overall spending.
“Gen Z are likely to be most impacted by some rising costs — for example, housing — as they rent or establish their own households and start paying bills for the first time,” the study states. “Some may even be gearing up to purchase houses or cars at a time when prices and interest rates remain sticky and high, making their monthly payments more expensive.
“Older generations, meanwhile, are comparatively more insulated from some of these rising costs, as they likely purchased a car or home some time ago when interest rates and prices were lower.”
Another factor benefitting boomers may be what the study calls “wealth effects” — older Americans have had more time to invest and accumulate financial assets, which increases their spending power.
How Gen Z Middle-Income Earners Can Boost Their Financial Stability
Although younger middle-income earners may not be doing as well financially as their older counterparts, there are actions they can take to improve their circumstances.
Improve Financial Literacy
“No matter where you are on your financial journey, taking control of your financial well-being requires embracing a learning mindset — getting a little bit smarter every day about budgeting and saving, paying down debt, investing and more,” said Mary Hines Droesch, head of consumer and small-business products at Bank of America.
Gen Z should seek out resources, such as books, podcasts and educational websites, to help improve their financial literacy.
Create an Emergency Fund
Aim to keep three to six months’ worth of living expenses in an emergency fund. Build toward your goal amount through small, consistent and manageable saving.
“An emergency fund acts as a financial safety net and insulates you from life’s unpredictability,” Hines Droesch said. “It’s meant to cover unexpected expenses, like a surprise medical procedure, family emergency or costly car repairs.
“Prioritizing your savings gives you the flexibility to afford unanticipated costs without compromising the responsibilities of your daily life.”
Make Savings Automatic
“Automatic savings tools can be a seamless way to build up your savings without even thinking about it, ensuring you’re setting money aside every month,” Hines Droesch said.
She recommended starting small by contributing a few dollars toward a separate, dedicated savings account each week.
“Once you’re in a rhythm, begin adjusting the amount you schedule to be saved as your lifestyle and priorities change,” Hines Droesch said.
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