Members of Generation Z with sufficient income tend to save, while young people with limited means confirm a financial paradox.
Older generations often accuse the youth of not wanting to work and spending money on unnecessary things, including risky assets such as cryptocurrencies and NFTs. However, young people have valid reasons for such behavior. Studies show that today’s youth, facing deteriorating economic conditions, begin to take such characteristics for granted. They are inventing the concept of "quiet quitting," indicating their agreement with the criticism.
A recent report from economists at the University of Chicago and Northwestern University, based on detailed data on financial transactions and the living standards of Americans, revealed interesting aspects. Young people without real chances of acquiring housing tend to spend more on entertainment, reduce their labor input, and invest in risky assets. Research conducted by Son Hyun Lee and Yongjin Yoo showed that those who have the opportunity to buy a home or already own one take fewer financial risks and work harder.
A similar situation is observed in the UK. Young renters who are unsure of their chances to save for a down payment are significantly more likely to take financial risks, such as betting online, compared to those who are already on the path to purchasing property.
It is important to note that Lee and Yoo, using data from various time periods and local housing prices, demonstrated that the relationship between housing unaffordability and economic behavior is causal. The increase in risky financial behavior and spending on entertainment is driven by worsening economic conditions. When housing affordability decreases, young people, realizing they will not be able to become homeowners, begin to resort to financial risks. At the same time, the more affluent part of the youth tries to save money.
The results also emphasize that Generation Z has insufficient resilience to stress at work. Many young people express dissatisfaction with the nine-to-five work routine on social media. Data shows that these views and behaviors are influenced by changes in economic reality. Previously, work served as a means to achieve a goal, but now, as the dream of owning a home becomes unattainable, work loses its meaning.
The financial problems faced by young people highlight the importance of parental support. The main obstacle to homeownership for youth is not low wages, but the need to save for a down payment. The question arises: why work late if the ultimate goal seems unreachable?
These studies have significant implications. First, they highlight the need to address the issue of housing affordability, as this could destabilize the economic and social structure of society: many young people are beginning to exhibit risky financial behavior that could lead to serious consequences.
Second, the studies emphasize the need for financial literacy among youth for successful living in conditions where risky financial decisions become the only way to achieve success. Today's youth are much more likely to remain renters than previous generations, which requires additional knowledge about ways to accumulate wealth and support in understanding that a way out is still possible.
Undoubtedly, one can speak of a growing economic nihilism among the youth; however, they are acting within the conditions that have been provided to them.
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