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The Pressure to Succeed: How Gen Z Can Manage Money While Supporting Their Parents
The pressure to excel in higher education has intensified over the years as more and more employers want job candidates to have at least a bachelor’s degree on their resumés. This pressure weighs heavily on Gen Zers and does not necessarily take into consideration the financial limitations young people face, or just how expensive college can be.
In many cases, it’s not just their own financial situations that Gen Z college students have to navigate, it’s also that of their parents. A new survey by EduBirdie found that 22% of Gen Z college students work to support their parents. This can be an incredibly heavy weight to bear.
What can this young cohort do to best manage their money amid big responsibilities?
Here’s what finance and college experts have to say.
Take Care of You First
Your parents may want your support and you may be obligated to them. That’s fine — but keep in mind that this is, in the end, your financial life, not theirs.
“Put your own oxygen mask on first as those who rely on you will be better served if you are in good physical and mental health,” said Patricia Roberts, COO at Gift of College, Inc. “Running yourself into poor health not only hurts you, it can negatively impact those you care about and who need your support.”
Contribute to an IRA or 401(k)
As part of the workforce, you should be actively contributing to a retirement plan. Aim to contribute as much as you can to a tax-deferred retirement account. Every penny counts.
“Contribute to a Traditional or Roth IRA,” said Marti Awad JD, CFA, CFP, SVP and financial advisor at Wealth Enhancement Group. “Or, if your company provides a 401(k) match (4% of salary is standard), contribute at least enough to maximize that match. Those dollars grow tax-free, and even relatively small amounts added over time can make a big difference.
“Get started as early as possible,” Awad said. “For example, assuming a modest 5% growth rate, $100 added every month starting at age 20 will grow to over $190K by age 65. Waiting until age 30 reduces the amount to a little over $108K.”
Use a Budget
Everyone has to budget, no matter where they are in their wealth journey. Gen Z college students working to support their parents are no exception and can benefit from aggressive and detailed budgeting.
“Review your expenses, establish a budget and stick to it,” Awad said. “Many people are surprised by how much they can save by keeping track of spending.”
Set Financial Goals
Sure, you’re juggling college and work and, perhaps most stressfully, the financial expectations of your parents, but that doesn’t mean you shouldn’t be setting money goals for yourself. Setting goals will help you establish smart budgeting habits that can keep you out of debt for the long haul.
“The most effective way to make your goals achievable is using a SMART goal-setting model: ensuring your objectives are Specific, Measurable, Achievable, Relevant, and Time-bound,” said Alia Dudum, money expert at LendingClub. “Once you set your goals, establish a budget around them to help you reach them one by one. As you achieve these goals, it’ll help you continue the momentum as you set new ones, and from there incorporate it into your lifestyle.”
Ditch the Credit Cards
It may be really hard to get by on cash only, especially if a chunk of your earnings are going to your folks. But it’s so important to resist credit cards as best you can. Credit card debt will only worsen your financial situation.
“The average credit card rate in America today is over 24%, which can quickly cause what you owe to balloon,” Awad said. “Pay off a card balance monthly, or if you already have accrued several months of debt, make it a priority to pay down. Forego discretionary spending until your balance is zero. And pay on time to avoid costly late charges.”
Determine How You Will Pay Off Student Loan Debt
If you’re accruing student loan debt while pursuing a degree and working to support others, it’s crucial to know sooner than later how you’re going to pay off that debt. There are repayment plans out there that can really help.
“The Saving on a Valuable Education (SAVE) Plan is the newest income-driven repayment (IDR) plan and, for almost all people, lowers payments compared to other IDR plans,” Awad said. “There are online calculators and other resources to help you evaluate your options.”
Don’t Shy Away From Saying No
It can be difficult to say no to one’s parents. Perhaps more difficult than it is to say no to one’s own children. But it’s good to say no to your folks if saying yes will only lead to debt and/or burnout.
“While most of us feel a strong obligation to our parents, be wary of expanding the support net to others,” Awad said. “Many professionals from low-income backgrounds cannot accumulate wealth because they fund extended family and friends. Try to decide to help objectively and not based on emotion.”
Communicate with Your Folks
Your parents and any other grown family members relying on you for help must be fully in the know of your financial situation, and you must be on top of what they expect from you. Always.
“Try to communicate regularly with your parents or head of household to determine what the expectations are surrounding your contributions, and also what your own personal goals include,” said Brittany Pederson, director of deposit and payment operations at Georgia’s Own Credit Union. “By opening up these types of conversations, it can diffuse any existing — or building — resentment from either side and create a more positive environment all around.”
Seek an Employer Who Will Help Pay Down Student Loan Debt
Even working while in college may not foot the bill for your education. It’s best to do your best not to end up buried in student loan debt upon graduation, as this can be a huge financial setback. To help deal with this, Roberts recommends seeking an employer who will help you pay down your student loan debt. These employers are out there, and typically offer what is called an employment-sponsored student loan repayment program.
“Beyond this, if you are considering additional degrees or certifications down the line, find an employer with a generous tuition reimbursement plan or other form of education assistance,” Roberts said.
Know That You’re On The Right Path
Though this is less of a tip and more of a reassurance, Gen Zers working their way through college while supporting their parents (or even those who are just supporting themselves) should recognize that they are on the right path toward higher earnings once they graduate.
Remember that the skills you are developing – particularly your resourcefulness, resilience, and ability to manage multiple responsibilities – will serve you well in a wide range of circumstances going forward.