Trending: Gen Z Is Leaving the Nest, But Are They Ready to Fly?

• Consumers are spending more of their personal income on housing, especially Gen Z consumers.
• Having multiple dependents or living alone are linked to a greater likelihood of living paycheck to paycheck.
• Consumers who are less confident in their ability to manage their finances are more likely to struggle financially.

As of June 2024, inflation is at 3%, a slight drop from 3.3% last month.¹ Yet, shelter and electricity continue to show higher inflation rates. As a result, consumers are spending more of their income on housing. This is especially true for Generation Z consumers, as fewer live with their families. Left to fend for themselves in a difficult economic climate, Gen Z consumers increasingly live alone, making them more likely to live paycheck to paycheck. Meanwhile, financial independence and lifestyle are linked to consumer confidence in their ability to manage their finances. Unfortunately, many younger adults still lack crucial financial literacy skills.

These are just some of the findings detailed in this edition of “New Reality Check: The Paycheck-to-Paycheck Report,” a PYMNTS Intelligence exclusive report. “How Changing Household Economics Impacts Financial Lifestyle” examines U.S. consumers’ financial lifestyles and explores the impact of household size on their financial standing. It draws on insights from a survey of 2,222 U.S. consumers conducted from June 5 to June 18 and an analysis of other economic data.^2,3,4

• What’s at Stake
• Key Findings
• Conclusion
• Methodology

What’s at Stake

After notable volatility in recent months, the share of consumers living paycheck to paycheck has become relatively stable. As of June 2024, 64% of consumers lived paycheck to paycheck. While this represents an increase of 3 percentage points from this time last year, it is slightly lower than May 2024.

Since June 2023, the share of consumers living paycheck to paycheck with issues paying their monthly bills has increased 2 percentage points to a high of 23%. In fact, the share of struggling paycheck-to-paycheck consumers has been on the rise in the last few months. These shifts are largely because the share of consumers in the lowest income bracket climbed the most from last year, indicating that inflation has eroded their spending power. Meanwhile, the share of consumers living paycheck to paycheck without difficulty has remained at 41%.

The share of consumers across all income brackets living paycheck to paycheck has increased in the last year. As of June 2024, 48% of consumers earning more than $100,000 lived paycheck to paycheck, up from 45% last June. The share of consumers who earn between $50,000 and $100,000 per year and live paycheck to paycheck rose from 65% to 67% in the last year. Yet, the share among those earning less than $50,000 per year climbed the most year over year. As of June 2024, 81% of these consumers live paycheck to paycheck, up 4 percentage points for June 2023.

In addition, all age groups showed an uptick in the share living paycheck to paycheck. Zillennials and Gen Z saw notable increases. These findings suggest that inflationary pressures are taking a toll on consumers’ finances. Lower-income and younger consumers are feeling the financial crunch the most.

Key Findings

Consumers are spending more of their personal income on housing, especially Gen Z consumers.

Housing costs are one area where rising costs impact consumers’ financial standing. Data shows that consumers are spending an average 38% of their personal income per month on housing this year. Moreover, this represents an average increase of 17% from last year, with all demographic groups spending a higher share of their personal income on housing this year than last.

Those spending the highest share of their income on housing include struggling paycheck-to-paycheck consumers (48%) and those in bigger households (41%). These consumers also showed higher-than-average increases since last year, indicating the impact of inflationary pressures. While currently not paying the highest share of their monthly income, Gen Z did show the highest year-over-year increase. Last year, Gen Z reported spending 25% of their income, but this year, that increased to 37%. This suggests how much transitioning to living independently can result in higher housing spend.

In fact, our study finds that consumers are, on average, 18% less likely to live with their parents or siblings compared to last year, largely due to a reduction in transitional and temporary living situations. Currently, 15% of the population live with family compared to 18% last year. Among Gen Z respondents, the difference is especially stark. As of June 2024, just 41% said they live with their parents or siblings. This represents a drop of 17 percentage points from the 58% who said the same in June 2023. Data also shows a year-to-year decrease among those who said they live with their family due to a transitional or temporary living arrangement. These findings highlight how growing independence among Gen Z, in particular, impacts their household spend and financial lifestyle.

Having multiple dependents or living alone is linked to a greater likelihood of living paycheck to paycheck.

Household composition is central in determining financial lifestyle. Interestingly, data shows that both large and single-person households are likely to live paycheck to paycheck. For example, 73% of paycheck-to-paycheck consumers live in households with at least four members, a 13% increase from last year. Households with four or more members are also the most likely to live paycheck to paycheck with issues paying monthly bills, at 27%.

Meanwhile, 61% of paycheck-to-paycheck consumers live alone, a 9% drop from 67% last year. We find those living alone are the second-most likely to struggle to pay bills, at 26%. Currently, 57% of consumers in two-person households live paycheck to paycheck, with 19% struggling to pay bills. Both these shares are up from last year. This suggests that even those sharing expenses with a roommate, partner or spouse face increasing financial challenges.

Larger households are more common among millennials, bridge millennials and Generation X, and consist mostly of couples with children. As household size increases, the share of dependents may rise in other ways, even as the number of household earners remains relatively the same. For instance, 6.6% of families of four or more have dependent parents or siblings living with them, while 5.2% of families in a three-person household have dependent adults. The most cited reasons for having such dependents are financial situations followed by caretaking.

The average share of consumers living alone increased 15% from last year. However, the share of Gen Z living alone rose by 40%. This is likely because fewer Gen Z consumers are living with their parents. But, as a result, the share of Gen Z living paycheck to paycheck is also on the rise.

Financial independence is linked to the ability to manage one’s finances, suggesting that financial literacy is central to consumer success.

Consumers who are less confident in their ability to manage their finances are more likely to struggle financially. Struggling paycheck-to-paycheck consumers, at 15%, are the most likely to say that they are uncomfortable managing their finances. In contrast, just 3.3% of those not living paycheck to paycheck say the same.

Just 34% of consumers who receive financial support and 32% of Gen Z consumers report having no problems managing their finances, compared to 64% of baby boomers. This suggests that less financially literate consumers are generally younger and more financially dependent.

Interestingly, we find savings balances tend to reflect financial confidence. For example, two-thirds of consumers with savings of more than $15,000 report that they have no problems managing their finances.

Data also shows that consumers who struggle to pay monthly bills report being confident in nearly half as many financial management skills as those who do not live paycheck to paycheck. In fact, 1 in 5 struggling paycheck-to-paycheck consumers were not confident in any financial skills.

Investing and savings goals have the smallest generational differences among financial literacy measures. There is a big gulf, however, when it comes to understanding lending and contracts. Gen Z consumers are less than half as likely as baby boomers to know how to get loans and credit. The same goes for how to read and understand financial contracts. No doubt, consumers gain financial literacy as they age, resulting in more financial stability. This suggests that younger consumers need to grow their financial literacy. Otherwise, they may continue to face barriers to financial independence and stability.

Conclusion

With housing costs on the rise, managing household finances becomes a challenge. Both large and single-person households struggle the most when it comes to meeting their monthly obligations. Moreover, Gen Z consumers increasingly live alone, and as a result, growing shares live paycheck to paycheck. Even as they strive for financial independence, many Gen Z consumers have yet to learn the necessary financial management skills. Consumers gain financial literacy as they age, resulting in more financial independence, security and savings. If younger consumers do not grow their financial literacy over time, however, they may struggle to save and be more likely to live paycheck to paycheck. Thus, educating young adults on financial management skills is key to a thriving society.

Methodology

“New Reality Check: The Paycheck-to-Paycheck Report: How Changing Household Economics Impact Financial Lifestyle,” a PYMNTS Intelligence report, draws on insights from a survey of 2,222 U.S. consumers conducted from June 5 to June 18 and an analysis of other economic data. The Paycheck-to-Paycheck series expands on existing data published by government agencies, such as the Federal Reserve and the Bureau of Labor Statistics, to provide a deep look into the core elements of American consumers’ financial wellness: income, savings, debt and spending choices. Our sample was balanced to match the U.S. adult population in a set of key demographic variables: 51% of respondents identified as female, 33% were college-educated and 38% declared incomes of more than $100,000 per year.

Read PYMNTS’ June 2024 “New Reality Check: The Paycheck-to-Paycheck Report” for more.

<sup>1. [Author unknown. Consumer Price Index. U.S. Bureau of Labor Statistics. 2024. https://www.bls.gov/cpi/. Accessed July 2024.]↩
2. [Author unknown. Consumer Credit – G.19. Board of Governors of the Federal Reserve System. 2024. https://www.federalreserve.gov/releases/g19/current/. Accessed July 2024.]↩
3. [Author unknown. Current Employment Statistics – CES (National). U.S. Bureau of Labor Statistics. 2024. https://www.bls.gov/ces/. Accessed July 2024.]↩
4. [Author unknown. Consumer Price Index Summary. U.S. Bureau of Labor Statistics. 2024. https://www.bls.gov/news.release/cpi.nr0.htm. Accessed July 2024.]↩</sup>