Whether the high cost of living is dragging them down or they've gone a little too far with treating themselves, Generation Z is sinking into debt as if it was quicksand.
Recent data shows one in seven Gen Zers is maxed out on their credit cards, while more than half are getting financial assistance from their parents or other sources to make ends meet.
According to the Federal Reserve Bank of New York, 15.3% of Gen Z credit card users are considered "maxed out," meaning they've used 90% or more of their total credit limit across all cards.
The Fed pointed out, however, that much of the reason Gen Z borrowers are maxed out is because they have much lower credit limits -- the average around $4,500.
"Much of this can be attributed to the shorter credit histories, and thus lower credit score, of the youngest generation, and to lower income," experts for the Fed noted in an article.
In comparison, millennials have an average credit limit of $16,300 and 12.1% are maxed out; Gen X has a $21,800 limit and 9.6% are maxed out; and baby boomers have a $22,000 limit and 4.8% are maxed out.
Meantime, a survey by Bank of America's Money Habits financial education team shows that more than half (54%) of Gen Zers age 18 to 27 receive financial assistance to make ends meet. The majority (46%) rely on their parents or family, while 9% rely on assistance from the government and 3% from friends.
Of those receiving financial assistance, almost a third (32%) get $1,000 a
month or more; nearly half (44%) are getting less than $500 a month. Gen Zers who receive financial assistance use that money to help pay for: groceries and toiletries (57%); rent/utilities (53%); phone plan (53%); and health insurance/payments (49%).
According to the survey, almost a quarter of Gen Z (24%) said their income is enough to cover the necessities, like rent, bills and groceries, but doesn't go much further than that. The survey also found that 52% of Gen Z members said they don't make enough money to live the life they want and that the high cost of living is one of the main financial challenges this generation faces.
Over half (57%) of respondents said that "making good money" looks like "being able to cover most of the non-essential spending I want to do." That being said, more than one-third (37%) said they do not "make good money."
Comparing themselves with their parents, almost a third (32%) feel like they are behind where their parents were at the same age in meeting financial goals, the survey shows.
"Many said they are delaying milestones and are not on track to buy a home (50%), save for retirement (46%), or start investing (40%) within the next five years – even though they are working toward those goals," Bank of America said in a statement. That's even as 67% are implementing lifestyle changes such as cutting back on dining out (43%), passing on events with friends (27%), and shopping at more affordable grocery stores (24%).
While many Gen Zers reported that they are not financially independent, 70% said they feel equipped to manage their day-to-day expenses and stick to a budget, while 66% said they feel equipped to build and manage credit. A vast majority (82%) of the generation has financial goals, and over half (51%) prioritize them.
However, "Gen Z continues to use their leftover income on experiential spending like dining out (36%), shopping (30%) and entertainment (24%) – higher than other generations," according to the Bank of America survey.