7 Worst Mistakes Gen Z Can Make With Money — and How To Avoid Them

With the ongoing inflationary pressures, nearly half of U.S. consumers struggle to cover monthly expenses and save money.

As of April 2024, approximately 60% of Gen Zers live paycheck to paycheck, according to a study conducted by Pymnts. Although they spend less than average on essential expenses like housing and groceries, Gen Zers can make mistakes with their money.

Check Out: Suze Orman Says If You’re Doing This, You’re ‘Making the Biggest Mistake in Life’

Read More: How Middle-Class Earners Are Quietly Becoming Millionaires — and How You Can, Too

Here are some common ones and how to avoid them.

Trying To Flex Too Hard on Social Media

“It’s easy to get caught up in the soft life trend, luxury hauls or the pressure to keep up with influencers. But spending money to impress others, especially on things that don’t build long-term wealth, can lead to serious financial stress,” said Dev Chakraborty, general manager of MoneyLion.

Chakraborty advised Gen Zers to focus on financial goals that benefit them. That could be investing, building an emergency fund or saving for retirement. “You don’t need to drop hundreds on the latest trend to be successful,” he said.

Read Next: Making This Common Investing Mistake? Experts Share the Easy (but Urgent) Fix

Not Building an Emergency Savings Fund

Life is unpredictable, and it’s crucial that Gen Zers have emergency savings in case something happens.

“Saving is one of the most crucial financial actions you can take for your future. This includes preparing for unexpected expenses as well as setting yourself up for a comfortable retirement,” said Casey Brueske, community education development specialist of PenAir Credit Union. “There are numerous ways to make saving work for you. For instance, by depositing your money in a high-yield savings account, you can allow your funds to work for you. Additionally, compounding interest can be a significant advantage.”

Falling For Buy Now, Pay Later Traps 

You’ve probably come across buy now, pay later (BNPL) advertisements when shopping online, which can be so tempting. However, using a BNPL plan could be a mistake.

“You delay the consequence of spending by using credit and buy-now-pay-later schemes, which makes spending more addictive. When you delay the consequences of spending by spreading the cost of something over a longer period of time, you’ll get more excitement from shopping, and this will likely make you addicted to shopping. This is a problem,” said Shane Enete, associate professor of finance at Biola University’s Crowell School of Business.

However, there are things that you can do to avoid it. “To prevent this, do not use BNPL or credit to buy things. Only debit cards and cash. Also, use a budgeting app to track your expenses on the day you buy them so you see the consequence sooner rather than later,” Enete said.

Treating Credit Like Free Money

Credit cards can come in handy when you’re in a tight financial situation, but maxing them out on unnecessary expenses is a huge mistake.

“Credit cards aren’t evil, but using them recklessly can wreck your financial future. Missing payments or maxing out your card can tank your credit score, making it harder to rent an apartment, buy a car or even get a job,” Chakraborty said. “Instead, use credit strategically — keep utilization low, pay off balances in full and regularly check your credit score.”

Being Afraid To Lose Money

“Gen Zs avoid investing because it seems too complicated. I think this needs to be corrected as early as possible. You don’t have to be Warren Buffett to just throw some money into the S&P 500 or an index fund or something and forget about it for the next 10 years,” said Lucas Barcelo, founder of Thrivin Life.

Start small and work your way up. And if you’re afraid of losing money, invest in low-cost index funds and exchange-traded funds.

Allowing Emotions To Drive Their Decisions

And if Gen Zers are investing, a key mistake is to let emotions drive their decisions.

“This is a big one, especially now with the current volatility and turbulence in the stock markets. This can create unrest and anxiety when a person looks at their account values going down and will cause them to question if they are doing the right thing. The reality is that ‘timing’ the market is impossible,” said John Foard, co-founder of Crown Advisors.

You can avoid emotional investing by investing long term and dollar-cost averaging. This way you don’t have to worry about market headwinds.

Not Starting To Save for Retirement Now 

Many Gen Zers think that retirement is too far off, but they don’t realize how much they’re losing with the power of compounding. The earlier you start saving for retirement, the better. 

“Gen Z is at the perfect age to build their retirement savings and enjoy the benefits of compounding interest over time. If they wait to start saving, they’ll end up having to save a lot more because their money won’t have time to grow with interest,” said Melanie Musson, finance expert at InsuranceProviders.com.

More From GOBankingRates

• 4 SUVs That Will Have Massive Price Drops in Early 2025
• How Paychecks Would Look in Each State If Trump Dropped Federal Income Tax
• 6 Subtly Genius Moves All Wealthy People Make With Their Money
• 5 Things You Must Do When Your Savings Reach $50,000

This article originally appeared on GOBankingRates.com: 7 Worst Mistakes Gen Z Can Make With Money — and How To Avoid Them

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.