Unlike millennials, Gen Zers are entering the labor market during a relatively prosperous age.
Instead of starting their careers off in what became known as the post-Great Recession period, Gen Zers have the advantage of accessing greater opportunities, both in the gig economy and in a more traditional corporate setting where the demand for workers highly skilled in all things tech is ever-growing. Now, it seems this environmental edge is giving them yet another advantage: the credit bureau TransUnion reports that members of Gen Z are financially better off than millennials.
Gen Zers are benefitting from the fact that loans are now more widely available than they were ten years ago.
The study looked at consumers born after 1995 and their credit history. Researchers found that with over half of Gen Zers being credit-active and having a VantageScore of 661 or above, young workers aren’t struggling to pay off their debt as millennials did.
Only 39 percent of millennials at the same age were able to achieve the same VantageScore, TransUnion explained.
What may also give younger consumers an edge might be their spending profile, which is completely different from millennials’ and makes them less likely to spend big early on.
Learning from Their Elders
According to Matt Komos, TransUnion’s vice president of US research and consulting, Gen Zers are benefitting from the fact that loans are now more widely available than they were ten years ago.
“At that time of the recession you had a significant contraction in the credit marketplace,” Komos wrote. “It was hard to get a loan anywhere.”
Further, Gen Zers are showing a slightly different approach to their finances, feeling more at ease with smaller loans: 41 percent of young workers today have a credit card, and 23 percent have an auto loan.
It’s almost as if millennials’ difficulties in finding gainful employment in their field served as a wakeup call for the younger generation.
When it came to millennials at the same age, only 34 percent had a credit card, and 16 percent had auto loans.
On the other hand, millennials were much more likely to take out student loans than Gen Z, a characteristic that is now costing them big time as their largest debt load comes from college-related debt.
With only 37 percent of Gen Zers taking out student loans as opposed to 44 percent of millennials at the same age, younger workers today seem less likely to be charmed by the (often empty) promises made by higher education institutions.
It’s almost as if millennials’ difficulties in finding gainful employment in their field served as a wakeup call for the younger generation.
Building Credit from an Early Age
When it comes to putting together the building blocks for a better financial future, building credit is always the way to go. It is also the most conservative and relatively easy way to start a financial profile that doesn’t require too much initial investment.
Gen Zers show they understand this reality, choosing to take on credit cards as opposed to student loans. Millennials, on the other hand, were often encouraged to look at higher education as a means to guarantee their future, believing that a college degree would help them obtain a better job.
With high loads of student loan debt, millennials aren’t as equipped to seek the same types of loans with the same low interest rates.
Needless to say, their approach didn’t always work out as planned.
As Gen Zers build up their credit, their scores soar.
Once these young workers decide to take bigger financial steps, purchasing a home or making personal loans to start their own businesses, their 740-and-above credit scores will surely play a major role in helping them access high-quality loan products.
With high loads of student loan debt, millennials aren’t as equipped to seek the same types of loans with the same low interest rates.
Conservative Use of Money Is Why Gen Zers Excel
Young adults today grew up listening to cautionary tales involving their older siblings, neighbors, and relatives and watched in horror as media sources discussed millennials’ unfavorable financial realities thanks to their high student debt loads. It’s no wonder that when it comes to money, Gen Zers tend to be more cautious.
According to a survey carried out by the American Psychological Association, Gen Z consumers between the ages of 18 and 21 see money as their top source of stress.
If this trend continues, Gen Zers could soon become some of the most successful professionals we have seen in a long time.
As a matter of fact, four out of five Gen Zers name money as the top item in the list of things that “freak” them out.
Considering that these fears play an important role in how young adults are choosing to navigate their finances, it’s only natural that Gen Zers are taking a more judicious approach to their money, at least presently. If this trend continues, Gen Zers could soon become some of the most successful professionals we have seen in a long time.
Until then, millennials might still have time to catch up. For that to happen, however, they will have to take a hard look at liquidating their student loan debt as quickly as possible.
Chloe Anagnos
Chloe Anagnos is a professional writer, digital strategist, and marketer. Although a millennial, she's never accepted a participation trophy.