What Gen Z Can Learn From Millennials’ Money Mistakes

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With the oldest among them born in 1997, many Gen Zers don’t even yet have jobs, credit cards or money of their own — and those who do are just getting started. That means they haven’t had time to make a lot of financial mistakes — yet. They can avoid some of the biggest and most disastrous money traps altogether simply by studying the ones that their immediate predecessors, the millennials, stumbled into while trying to find their own way in the world. 

More Lessons: What Millennials Can Learn From Gen X’s Money Mistakes
And: What Gen X Can Learn From Boomers’ Money Mistakes

Gen Z Should Avoid Being Influenced by Influencers

Sabrina Hamilton, creator of the personal finance blog Finance Over Fifty, worries that millennials have based far too many of their spending choices on the imaginary lifestyles of the internet stars who rose to fame as they were coming of age.

“The influence of social media has left many millennials succumbing to the pressure of keeping up with their peers,” Hamilton said. “This has led to lifestyle inflation and increased debt.” 

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See: How Much Do Instagram Influencers Make? 2021 Top Earners

Research from Charles Schwab seems to confirm that suspicion. About half the millennials surveyed in the study reported being influenced to spend money they didn’t have by the lifestyles their idols portrayed on social media. Instagram-based pressure and temptation can be especially dangerous with non-housing big-ticket items, where big loans are often handed out with only the most modest of vetting. 

Gen Z Should Drop Their Auto Loans Down a Gear

Millennials were actually less likely to buy homes as young adults than the Gen Xers above them, but they were notorious for overspending on cars — and the people who sold the cars didn’t exactly make it hard.

Find Out: 8 Surprising Industries That Are Thriving — and Have Millennials To Thank

“The automobile industry may possibly be the next housing crisis,” said Vadim Verdyan, financial advisor and head of advice with the financial service Albert. “During the housing crisis, you could get a NINJA loan, which stands for ‘no income, no job.’ The automobile industry isn’t that different. When you buy a car, they only really check your credit, and even then, if you have poor credit, that doesn’t mean you can’t get a car. It just means your interest rate will be very high. Outside of that, they may ask you what your income is, but paystubs or W-2s are not usually checked, nor is any underwriting completed to verify it. So, a person who makes $40,000 a year but doesn’t have that many bills could walk out of a dealership with a $35,000 car because they can technically make the payments.”

For many millennials, this meant years of making car payments that looked more like mortgage payments. When they’re scrolling their Instagram feeds, Gen Zers who are considering following in those same flashy footsteps should remember the basics of auto loans. 

“Your car payment should not exceed 10% of your monthly income and 35% of your gross annual salary,” Verdyan said. 

More: Common Money Myths About Millennials

Gen Z Should Start Saving Right Now

It’s hard to imagine there are many older people in America who don’t wish they had saved more money than they were young. Time is the single most valuable asset any investor can have — and Gen Z has more of it than anyone. Their older millennial counterparts, on the other hand, already squandered a lot of theirs. 

Read: Surprising Ways Gen Z and Millennials Are Worlds Apart Financially

“One financial mistake that millennials tend to make is not saving enough for retirement,” Hamilton said. “Median retirement savings for millennials is only $23,000, compared to $64,000 for Gen X. A growing trend also has millennials tapping their retirement accounts to pay off debt and supplement their low incomes.”

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The Best Thing Gen Zers Can Do Is Get Off on the Right Foot

Another luxury of youth is that bad habits haven’t yet been formed — or at least not cemented. Aside from saving money, teens and young adults should prioritize financial education. The set just above them largely ignored that responsibility.

See: Baby Boomers, Gen X or Millennials — Who Really Had It Worst Financially?

“Another mistake many millennials make is not taking the initiative to learn about personal finance,” Hamilton said. “Most public schools no longer teach financial literacy skills, leaving this generation on their own to figure out sound money management.”

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Last updated: April 6, 2021

About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street’s investment community in New York City.

What Gen Z Can Learn From Millennials’ Money Mistakes
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