Bank of America's latest Better Money Habits report, surveying 1,133 adults aged 18 to 29, reveals a generation caught between disciplined saving efforts and persistent financial headwinds. While 69% of respondents have made changes to cope with rising costs over the past 12 months—including cutting dining out, skipping social events, and taking on side hustles—nearly half (49%) still cite the high cost of living as the top barrier to financial success, a figure that has remained virtually unchanged for four consecutive years.
Matt Gellene, head of specialized consumer client solutions at Bank of America, noted that the effort-to-outcome ratio feels broken for many young adults. “They're cutting back on dining out, picking up side hustles and starting budgets, so clearly the discipline is there,” he said. “But when nearly half of Gen Z still points to the high cost of living as their biggest barrier while wages aren't keeping pace, you have to see that the math just isn't working in their favor.”
Housing affordability is a growing strain. The share of Gen Z spending more than half of monthly income on housing has climbed to 17% in 2026, up from 13% in 2025 and 10% in 2024. Nearly a third of respondents identify rent or housing as a top obstacle. Middle Gen Z (ages 23 to 25) are the most squeezed, with 51% reporting they live paycheck to paycheck, compared with 36% of the youngest cohort (18-22) and 43% of those aged 26-29.
Gellene attributes the mid-20s crunch to the withdrawal of parental support. Among 18-to-22-year-olds, 51% receive financial help from family, but that share drops to less than a third by ages 23-25 and under one in five by the late 20s. Overall, only 34% of Gen Z now receive parental assistance, down from 46% in 2024. “That age is really when the training wheels come off,” he said. “As the support fades and the full weight of independent living—rent, debt, groceries and health insurance—hits all at once, usually on an entry-level salary, Gen Zers 23-25 find themselves caught between a rock and a hard place.”
Retirement saving remains thin despite rising savings rates. Two-thirds of Gen Z say they are currently saving, up from 60% in 2024, but only 22% contribute to a 401(k)—a modest increase from 19% in prior years. Among those with household incomes above $100,000, just 26% use a 401(k) and only 23% contribute to a traditional or Roth IRA. When asked what they would do with an extra $300 a month, 54% said they would put it into savings, a higher share than Baby Boomers (45%) or Gen X (40%).
Gellene sees the retirement gap as a prioritization issue shaped by immediate pressures. “The saving instinct is genuinely there, and it's been growing for years,” he said. “But when you look at what they're saving for—emergency funds (33%), major life events (37%), paying down debt (29%)—these are short-term goals driven by immediate pressures. Retirement feels abstract when you're still working on building a financial floor.” He added that contributions climb meaningfully as Gen Z ages, suggesting the intention exists but needs breathing room to act.
Financial stress is widespread: 30% of Gen Z report experiencing it, and 41% say they deal with financial guilt at least once a week. When stressed, 37% avoid thinking about money altogether, a higher avoidance rate than older generations. Yet 92% still treat themselves to small purchases, and 58% of those who indulge say they sometimes spend more than intended. Gellene cautioned advisors not to misread the “little treat” phenomenon as recklessness. “Small rewards are a healthy part of how people get through the week,” he said. “The issue isn't the treat itself; it's when the behavior quietly becomes a habitual pattern that chips away at bigger goals.”
For advisors, the data underscores an opportunity to help Gen Z clients balance discretionary spending with long-term objectives. As Vanguard's 2025 data shows, auto-enrollment and savings rates have hit records, but hardship withdrawals are also rising—a trend that mirrors Gen Z's struggle to build a financial floor. Meanwhile, IRA assets have reached $18 trillion, with rollovers driving 39% of the U.S. retirement market, highlighting the potential for advisors to guide young clients toward retirement vehicles as their incomes grow.
