Gen Z is running out of cash, and that’s bad for the economy

investmentnews.com:

The share of Americans who said they could cover a $400 emergency expense with cash or equivalent dropped for the third quarter in a row, according to a survey out Thursday.

Young adults in particular are showing higher financial stress as they face the return of student loan payments and higher prices. The share of Gen Z adults who say they’d have the cash to cover an unexpected expense dropped to 28%, down 11 percentage points from the first quarter of this year, according to a poll conducted by decision intelligence company Morning Consult for Bloomberg News.  

“Gen Z consumers have really been supporting a lot of the surge in spending that we’ve seen over the summer,” especially on discretionary categories like vacations and apparel, said Morning Consult economist Sophia Baig in an interview. As student loans resume and cash runs out “they’re starting to sort of feel the heat a little bit more, especially with these emergency expenses,” she said. 

Overall, US adults who said they could cover unexpected expenses with cash fell by 3 points over the same period, widening the financial gap between Gen Z adults and the rest of the older generations. 

The US economy remained resilient last quarter thanks to robust consumer demand despite high prices and rapidly increasing borrowing costs. While the rate of inflation has slowed and the Federal Reserve held its benchmark rate steady at its meeting Wednesday, strong economic data has left the door open for further hikes.

The survey showed more Gen Z adults — who range in age from 18 to their mid-20s and have a tendency to rely less on credit than other generations — are using various forms of debt more often to pay for emergency expenses. Around 29% of them are putting them