It seems likely and logical that the tariffs will impact Gen Z’s spending and saving habits. According to the Bank of America Institute, they currently spend twice as much as they have in savings.
The research firm EMarketer predicts that as tariffs climb, Gen Z will spend more on second-hand goods, purchase even more lower-cost brands and shop at warehouse clubs.
The economic news has been a little nerve-wracking in recent months, with nonstop talk of tariffs, rising rents and the high price of eggs. And if you’re a member of Gen Z, you already have some financial challenges built into your life.
What Constitutes Gen Z?
Generations usually span 15 to 18 years, according to the Pew Research Center. Gen Z is typically considered to include anyone born between 1997 and 2012.
Still, if you’re between the ages of 13 and 28, you’re considered a member of Gen Z. While the younger members of Gen Z can let their parents worry about the economic news, the older members collect paychecks.
So, with the headlines suggesting a possible recession and inflationary times ahead, what should you be doing with your money if you’re a Gen Zer? We reached out to economists and financial advisors for some suggestions.
[Related:How Inflation Is Impacting Everyday Americans: 6 Stories]
Don’t Panic Buy
You’ve probably heard that tariffs may drive the price of goods and services up, and that there could be supply chain issues down the road, causing empty shelves. You may think, “Well, I’ll buy everything I need for the next few months now, and I’ll be broke but have stuff I need.”
Try to resist that type of thinking, says Stacy Mastrolia, a certified public accountant and associate professor of accounting at Bucknell University’s Freeman College of Management in Lewisburg, Pennsylvania.
“What members of Generation Z should not be doing now is making purchases out of fear,” she says.
She points out, for instance, that if you rush to buy a car now because you’re worried it’ll be more expensive later, you’ll have a car, yes, but you may make a significant purchase that you can’t afford — which will just make it harder to manage your budget.
“Members of Generation Z should stay on their plan before the tariff wars, focus on their immediate goals and not let themselves be swayed by what might or might not happen in the future. Control the controllables,” she adds.
Pay Down Debt and Start or Add to Your Savings
If you pay down high-interest debt but have no savings, some financial emergency may arise. If you don’t have an emergency fund, you may need to borrow money, which will add to your debt.
On the other hand, if you only save money and ignore or chip away at high-interest credit card debt, you’re likely creating more debt that will be harder to pay off.
That’s why many financial advisors will discuss paying down debt and saving money in the same breath.
“As a group, Gen Z should be focused on a couple of things right now,” says Nick Bour, a financial advisor and founder and CEO of Inspire Wealth in Brighton, Michigan.
“They should be paying down any high-interest revolving debt or student loans. They should also be trying to build a cash or emergency reserve of at least three months of expenses with a goal of six months of expenses,” he says.
That savings fund is especially important, says Daniel Burnside, a clinical professor of finance at the Simon Business School at the University of Rochester, in New York.
“If you like living on the edge, then by all means, spend everything you earn and cross your fingers,” Burnside says. But he doesn’t recommend it. “Things happen, and they seem always to cost money when they do,” he says.
[READ: How to Create a Saving Strategy]
Track Your Money
“The best way to track your money is to write down every penny you spend. Do that for a month and look at it, and you’ll change how you spend money,” Burnside says.
Burnside says you can use personal finance software or a computer spreadsheet, “but paper works fine.”
Burnside says, “Most young people find it difficult to save, which ironically often makes them spend more. The reasoning is usually something like, ‘I never have any money anyway, so I might as well spend it on something fun like going out with my friends or going on vacation.'”
Burnside says the mindset that “it’s pointless to budget when you barely have money to get by ” is harmful and untrue.
But if the economy does get rockier, and prices go up, you’ll need every dollar you save.
[Read: A Recession Seems Likely: Here’s How to Prepare Your Finances]
Once You Have an Emergency Fund, Start Saving for Retirement and Investing
If you don’t make enough money to pay your bills, putting money away for retirement may not be a realistic plan. But every financial expert will urge you to try to find room in the budget for your retirement accounts.
So, if you have a cash cushion, try to turn your focus to saving for retirement. It’s a great time to invest, in fact, especially for members of Gen Z, according to Mastrolia.
“The U.S. stock market is on sale. If they invest now, while the market is lower, their long-term horizon will allow them to ride out this market dip,” she says.
If your employer offers a company match on a 401(k) or 403(b), Bour recommends taking advantage of that.
“If there’s no employer match available on your retirement account, then I would suggest starting a monthly contribution to a Roth IRA. A focus on something is better than nothing. Whether it’s $50 or $100 per month doesn’t matter. Starting to save at a young age will benefit you tremendously in your 50s and 60s,” Bour says.
Jordan Mangaliman is a wealth strategist and owner of Goldline Financial Services in Fullerton, California. He suggests that Gen Z strive to save 5% to 10% of their paychecks for retirement, typically after they have fully funded an emergency savings accounts.
[Related:10 Good Reasons to Spend Money from Your Emergency Fund]
Don’t Panic
If you’re making an entry-level income and reading about tariffs and possible high prices, you may be rattled, but remember that the news isn’t all bad. For instance, the job market is currently fairly strong, and maybe the high prices of goods and services won’t be as bad as predicted.
But whatever happens with the economy, Mastrolia says that “it’s tough to do all of the things when you are just starting out,” such as saving money for retirement, paying down debt and creating an emergency fund.
“My advice to [Gen Z] is to focus on one thing at a time and not try to do everything at once. They should identify their highest priority and focus all of their problem-solving skills on that challenge first,” Mastrolia says.
More from U.S. News
What Will Cost Most Under Trump’s Tariffs?
What a Trade War Under Trump Would Mean for Your Finances
Will Trump’s Policies Spark a Recession?
Tariffs Are Impacting Gen Z Spending. Here’s How They Can Financially Cope originally appeared on usnews.com
