Gen Z is grappling with a financial balancing act, new report reveals

For a generation often cast as screen-addicted and fiscally frivolous, Gen Z is showing surprising discipline with money. But their efforts are not necessarily leading to progress.

The 2025 Better Money Habits report from Bank of America, published today (July 29) reveals a Gen Z cohort that's financially self-aware, action-oriented, and in tune with economic reality. But despite side hustles, budgeting apps, and frugal grocery swaps, many still find adulthood more expensive than they expected.

Over half of respondents cite the high cost of living as their biggest financial barrier and 35% say that once they start paying their own bills they find their essential expenses exceed expectations.

Almost three-quarters took action to improve their finances last year including cutting back on dining out (41%), switching grocery stores (23%), or starting a side hustle (18%). However, more than half (55%) still lack an emergency fund that would cover three months of expenses, a figure stubbornly consistent since 2022.

Gen Z believes in saving and planning for retirement but can’t always afford to do so. The report reveals that 51% managed to save something in the past year but only 18% save a set percentage of their paycheck each month, while 29% say they want to save but simply don’t earn enough.

When asked about retirement savings, just 19% are putting a percentage of their paycheck into a 401(k), and only 14% contribute to an IRA, with more than a third admitting that they have no idea how much they need to retire, and 11% doubting they ever will retire.

Given these findings, its not surprising that one in three Gen Zs reports feeling financially stressed, mostly due to insufficient income and macroeconomic instability.

But while many take steps such as budgeting or transferring money to savings, 33% avoid their finances altogether when the pressure mounts.

Still, these young Americans are not financially reckless and are more financially transparent with friends than generations past. Two thirds feel no pressure to spend beyond their means, and nearly half are comfortable skipping social events due to cost.

But Gen Zs still enjoy treating themselves with 91% saying they self-gift for emotional boosts including 24% who do it daily or multiple times a week. However, two-thirds claim they have a clear sense of their spending boundaries, even if a third still splurge beyond what’s wise.