Gen Z Spends Twice as Much as They Have in Savings, Bank of America Study Finds
Written by
Gabrielle Olya
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
People typically fall into two categories: spenders and savers. When it comes to Gen Z, most seem to be spenders. According to a new Bank of America study, Gen Z has higher discretionary and necessity spending growth than the average consumer. For example, Gen Z spending growth on entertainment is up 25.5% year-over-year, and it’s up 13.8% for travel.
Unfortunately, their saving habits are not keeping up. According to the study, the average Gen Zer does not have enough in their savings account to cover a month of spending. Data from February showed that their spending-to-savings ratio was 1.93, meaning they were spending nearly twice the amount that they had in savings.
Here’s a look at why this generation’s spending is outpacing its savings, the long-term consequence of this behavior and how Gen Z can strike a better balance moving forward.
Why Is There Such a Huge Gap Between Gen Z’s Spending and Saving Behaviors?
There are several factors contributing to the fact that Gen Z’s savings are not keeping up with their spending.
“Part of this is due to Gen Z starting their financial journey,” said Taylor Bowley, economist at Bank of America Institute. “They are coming from extremely limited spending to leaving their parent’s house or their college campus and spending right out of the gate. And they’re really spending on experiences like travel or going to concerts.”
The other big factor is that they are entering an economic environment with high levels of inflation.
“Child care is a great example of this ‘tale of two cities,'” Bowley said. “On one hand, yes, Gen Z is just starting to possibly have kids of their own and need child care services, but the CPI growth for child care has been higher than the overall inflation rate.
“What’s the result? Gen Z is spending more than twice the amount of what they have in their deposit balances.”
Browley noted that this gap has increased since 2023 and remains much higher than other generations’.
“Another caveat here is that Gen Z, as a generation, also operates differently than baby boomers in that they are more likely to have multiple accounts for either investing or saving, so it’s possible some of their financial picture isn’t as clear cut as what we see in this ratio,” she added.
The Long-Term Consequences of Spending More Than You Save
Gen Zers who routinely spend more than they save are starting their financial journeys off on the wrong foot.
“They risk getting caught in a cycle of debt that can delay financial independence or big goals like owning a home or starting a family,” said Holly O’Neill, president of retail banking at Bank of America. “On top of that, without savings to fall back on, Gen Z are more vulnerable to unexpected expenses and life’s surprises — whether it’s job loss, medical emergencies or car repairs.”
How Gen Z Can Get Their Spending and Saving Back on Track
For Gen Z, small steps can make a big difference in securing long-term financial stability.
“Create a spending plan to level up your money game,” O’Neill said. “Whether you’re just stepping into the workforce, adjusting to a new city, saving up for an epic post-grad adventure or tackling student loans, a realistic budget that evolves with you is essential.”
The right savings approach depends on your personal circumstances and life stage, but she recommended starting with the 50/30/20 budgeting method.
“Allocate 50% of your after-tax income to cover needs (rent, student loans, groceries), 30% to wants (entertainment, dining out, subscriptions), and 20% to savings,” O’Neill said. “However, don’t be afraid to adjust the percentages to fit your financial priorities. The key is to make it work for your goals and circumstances.”
She also recommended practicing mindful spending.
“It’s tempting to splurge when you start earning money, but developing mindful spending habits early on is key,” O’Neill said. “Living within your means — or even below them — will leave you with more money at the end of each month, giving you the flexibility to pay down debt, boost your savings or treat yourself occasionally.”
In addition, it’s essential to open a savings account if you don’t have one already, and add to it regularly.
“A separate, dedicated savings account safeguards your deposits and helps you be intentional about saving,” O’Neill said. “Remember the long game — saving is a marathon, not a sprint. Don’t get discouraged by short-term setbacks. Stay focused on your goals and celebrate your progress along the way.”
To ensure you stick to your savings goals, O’Neill recommended making the process automatic by setting up reccurring transfers — even if it’s just a small amount each week.
“Pay yourself first by treating savings like a nonnegotiable bill you have to pay,” she said. “You’ll be surprised how quickly it adds up.”
More From GOBankingRates
