According to a survey done by Country Financial, nearly half of Gen Z participants feel they are not at all prepared for a recession. This comes as Gen Z consumers are falling behind on credit card and auto loan bills and accumulating credit card debt at a pace not seen since before the pandemic. So how can this generation navigate this economic uncertainty? Chelsie Moore from Country Financial joined Cheddar News to discuss. 


Opening Bell

Gen Z relying on credit cards to offset inflation

here to discuss is Chelsea more wealth and financial planning director at country financial, Thank you so much for joining us here today. So a recent report shows that gen z you know racked up 30% more credit card debt compared to maybe this time last year. So what are some of the factors driving this increase in credit debt based on our country Financial security index um of american consumers, We found that over half of american consumers so that they are not willing to give up a life lifestyle sacrifice. So this is things like streaming, dining out entertainment or pampering in the event of a recession. So going back to 2020 and 2021, we saw that consumers were building up a nice savings cushion, they're saving more than they were spending. So that was really nice. What we've seen so far this year is that that savings is continuing to dwindle and like you said, even going into needing to rely on some debt like credit card debt to fund those purchases. So this is certainly one area that we would suggest consumers take a look at to determine if there's an opportunity to cut back on some spending here, especially in the inflation environment that we're in. So what is this generation spending the most money on right now then? Yeah, that's really tough to say. Um what I think is interesting about the data is just looking across the generations, um gen Z is feeling less financially secure, less confident in repaying their debts less confident in uh the ability to comfortably retire. So thinking about this generation just coming onto that cusp of adulthood, this is really the first recession that many of them are experiencing as adults being that financially independent adults. So it's really a tough environment for them to navigate in. Now. This data, I think by the way they're spending it on this revenge travel there, like I'm going on vacation and put it on the credit card and get all this stuff I couldn't get last year. But you know what, this data comes as no surprise as inflation continues to search. So how much of this has to do with, you know the fact that wages are falling way behind the rise in consumer prices. Yeah. You see that um wages falling behind right now um on your previous segment, talking about many companies really looking at this and starting to lay do layoffs. Um So while we see these large corporations preparing for a economic recession, we're not seeing consumers follow suit and make those cutbacks that they may need to do. So I want to talk about the difference between this generation and others because Alicia and I were talking before the show saying, you know, we remember when we were in college and they give out a free shirt, you take credit cards and I may have gotten a little too many of them, but why is this impacting this younger generation in particular and how does this level of debt compared to previous generations at the same age? Yeah, I think what's interesting is just looking at the number of recessions that each generation has experienced. So if you think about our baby boomers as adults, they've experienced about eight recessions. So they've had that experience to whether the ups and downs and know what to do during those recessions. Gen x is four millennials 1 to 2. So we're looking at gen z really the first recession they experienced as adults was 2020 and that one was definitely different. I'm sure we can all agree on that based on the pandemic. So this is really the first recession that they're coming into really the first time that they've really experienced that rising inflation rate environment to so some of that initiatives lack of XP of really kind of having a nice upward market and low inflation and low interest rates for the majority of their adult lives. So then we need to help some folks out here. What advice do you have for myself and the other jen's ears out there on how to combat the pressures of inflation? I think the first one is just, what are your goals? So all of us have different goals. Are you saving for a large revenge trip? Are you planning on a large purchase a home a new vehicle uh certain lifestyle that you're trying to reach. So the first thing is to decide what are your goals. The second thing is to get that debt under control. So whether through consolidating the debt um or trying to your debt to lower payments, lower amounts um or even in our rising interest rate environment, looking to see is your debt interest rate to hire their areas through consolidation that you could possibly get a lower interest rate environment. Um And then the most important thing is just a budgeting um tips. So making sure that you're looking at your income figuring out first how much you want to save and then that leftover money is what you get to spend. We all need that advice right there. Do you think that maybe some of these genes ears are too young to get a credit card, Maybe they should wait till they're more responsible or parents to say, you know, not right now. Yeah, I don't think age um really dictates how responsible you can be with your credit card because we know that consumers all across the the age ranges can be very irresponsible with credit cards. So I would say based on your own lifestyle and habits, can you pay off that credit card in full every month. So it's a great way to get free money if you can get the points and you can get the cash back or what other opportunities you may have through your credit cards. However if you are using a credit card to go beyond your spending beyond that budget, then that's where you shouldn't get one. But if you know that you can keep your spending in check, you can pay off that credit card at the end of every month then certainly it can be a way to to get free money, free points. Um Maybe even include some points on that revenge travel trip that you're planning. Yeah that was a great tip of making sure you pay it off every month. I say if you can't afford to pay it off every month, don't put it on the card to begin with. But what about the number of cards like what is a good range that you're not jacking up your credit score at the same time having so many credit cards open. Yeah I would say not more than a handful um because now Chelsea handful could be five or six. I can hold a lot of my hands, what does a handful mean? Yeah I would say whatever you feel like you can handle and control. For me it's about probably three because other than that you get it's a little hard to get your spending under control because it's hard to keep track of. So I would say maybe 2 to 4 um would be a good rule of thumb of number of credit cards but I think more important than that number of credit cards is that total balance so making sure that you know how much is on each one or simplification, you might just want to start with one, see how that goes, and then add another one. If there's a certain travel card or points card that you feel like is attractive for your lifestyle. All great advice and tips. Chelsea more from country Financial, thank you so much for your insight on the