Despite higher incomes, access to a stronger labor market, and relatively healthier overall balance sheets, Generation Z feels significantly worse about their financial situation than their Millennial counterparts. In our view, the root cause lies in persistently high inflation and a sharp deterioration in affordability, which has dampened confidence and made typical life goals like buying a home seem even more unattainable. (Millennials, born approximately 1981–1996; Generation Z, born approximately 1997–2012.) In the Federal Reserve's SHED survey, in 2015, a net 17.7% of respondents aged 19 to 27 reported that their financial situation was better than a year earlier, roughly double the reading for all adults. By 2025, this reading for the same age group has fallen to -3.1%, only slightly higher than the -4.5% for all adults. A University of Michigan survey shows a similar trend. Historically, confidence among 18- to 34-year-olds has been significantly higher than the overall index, but in 18 of the past 20 months, it has been lower than the overall reading. This had never happened before 2018. The readings for young people rebounded in September, but it's currently difficult to determine whether this is a trend reversal or a one-off fluctuation.
