Recent headlines paint a grim picture for young adults regarding their present and future financial situation.
Martin Lynch
President, Financial Counseling Association of America
At a stage in life when many are having children, buying homes, paying off student loans, and beginning to take care of their own parents, many young adults are living paycheck-to-paycheck and barely get by.
Gen Z adults — who are now in their 20s — are entering the workforce with limited job prospects, higher student loan debt, and a higher cost of living. Even if they’re able to settle into a career before they turn 30, their peak earning years are still a long way off. Zoomers also face a more recent phenomenon that didn’t plague their predecessors: a digital age that fuels impulsive spending at the touch of a screen.
The Financial Counseling Association of America (FCAA) and its non-profit member agencies help consumers nationwide by providing free financial education and personalized counseling. The FCAA offers these six strategies for young adults to get on the right financial track:
1. Create a budget and stick to it
Identify where your money comes from and what you spend it on. Being honest about your priorities makes it easier to determine those expenses you can reduce or eliminate. Use the FCAA’s free budgeting calculator, the Debt Freedom Tool, to create a budget.
Fortunately, young adults are already changing their spending habits to improve their financial situation, according to a 2023 study conducted by Bank of America. Seventy-three percent of Zoomers say they are cutting back on unnecessary spending by cooking at home more often rather than dining out and spending less on discretionary items like clothes and entertainment.
2. Save for emergencies
Save for emergencies and short-term goals with automatic deposits into your savings account. If a small portion of your paycheck goes directly into savings, you’ll be less likely to spend it. Then, you’ll be better prepared if your car breaks down or other unexpected expenses arise.
3. Check your credit report and work to improve it
Review your credit report for free any time at www.AnnualCreditReport.com. Checking your reports won’t impact your credit, and it can help you detect identity theft. Establishing good credit takes time for young adults. Starting now could make a difference in your ability to purchase a car or home.
4. Pay down balances and avoid taking on new debt
In 2023, credit card balances hit a record high for many Americans who had resorted to credit cards to see them through the pandemic. According to recent data reported by Fortune, unsecured debt ballooned between March 2022 and February 2024. Gen Z’s debt grew by 62% over this period. High interest rates can cause credit card bills to snowball and become overwhelming.
5. Take maximum advantage of employer retirement accounts
If your employer offers a matching 401K plan or other type of retirement account, this is a golden opportunity for young people to build financial security. Have the maximum amount withheld from your paycheck to receive the most matching funds possible. If you don’t, you’re throwing away free money.
Retirement may seem far away, but saving now for the future is a wise practice. By maximizing your contributions, you’ll also lower your adjusted gross income, further reducing your student loan payments if you’re on an income-driven plan like SAVE.
6. Get help from a non-profit credit counselor
When in doubt — or in trouble — with credit card debt, a low credit score, or in planning a budget, consult with a certified credit counselor. The FCAA’s non-profit member agencies offer free or affordable debt and credit counseling as part of their financial educational mission. Find a credit counselor to help Zoomers get their finances in order.
