Gen Z’s Financial Habits Show Independence and Challenges
Young Americans, particularly those from Generation Z, are putting effort into saving money, even amid rising housing costs. A recent study highlights their commitment to future goals and retirement planning.
Released on Tuesday, Bank of America’s “Better Money Habits” study sheds light on how Gen Z is navigating adulthood. Remarkably, only 34% of this age group relies on family for financial support, which is a decrease from 39% in 2025 and 46% in 2024. It seems like they’re really striving for financial independence.
Will Smeida, head of financial centers at Bank of America, remarked on this trend, saying, “You’re saving more, you’re less dependent on your family, and we think that’s a very positive thing.” Growing up, after all, can be tough and expensive.
Interestingly, Gen Z is also leading the way in what some are calling “exaggerated budgeting.” A striking 42% of those surveyed said they would feel comfortable scaling back on social activities if it stretched their budgets too much. This figure hasn’t changed since 2025 but has increased from 38% in 2024.
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Smeida also pointed out that Gen Z is discerning when it comes to spending. They’re willing to decline certain expenses, like travel and upscale dining. This is a notable shift in behavior, where being transparent about financial choices is seen as a healthy practice. “Saying no to something is a positive behavior,” he mentioned.
A majority—75%—of respondents explore frugal options when socializing, seeking out free or inexpensive activities. This trend is especially evident among younger members of Gen Z, particularly those aged 23 to 25, as well as among slightly older individuals aged 26 to 29.
Rising Costs Put Pressure on Older Generations, Too
The study also pointed out challenges faced by older generations; nearly half of Gen X workers have tapped into savings and postponed retirement plans due to stagnating wages and increased costs. It’s something many can relate to, I suppose. Smeida concluded, “It might be painful in the short term, but it definitely helps people stay on track.”
While Gen Z exhibits growing financial independence, they still seek validation when making purchases. About 40% of them look for reassurance from family and friends prior to spending, compared to lower percentages in older generations. Among them, 18% look for validation before a purchase, 8% afterward, and 14% both before and after.
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More of Gen Z is saving compared to previous years—66% are setting aside money now, up from 63% last year and 60% in 2024. About 36% aim to save as much of their extra cash as possible, while 22% are contributing to retirement accounts, like 401(k)s.
However, it’s not all smooth sailing. Many, around 29%, cite housing costs as the biggest barrier to financial independence—a stubborn figure that hasn’t shifted much over four years. Additionally, 17% of Gen Z reports spending more than half their income on housing.
“This number has risen,” Smeida noted, indicating it’s gone up from 13% in 2025 and 10% in 2024. It’s just one of the more troubling findings of the report. It’s an alarming situation when such a substantial chunk of income is directed toward housing. It clearly impacts all aspects of financial stability, squeezing out savings and discretionary spending.
