Four Things A High School Senior Needs to Know Before Graduating
Young adults are not known for being the most fiscally responsible people. Yet financial
planning is more important than ever for a generation that is struggling with high inflation and
debt and has a tendency to prioritize spending over saving.
If your advice is falling on deaf ears, try putting yourself in your child's position and seeing the
current economic environment through their eyes. Professional guidance can also help break
through money management barriers and prepare a young adult for a lifetime of financial
success.
Tuition Costs Have Never Been Higher
Eighty-three percent of Generation Z (those born between 1997 and 2010) say that a college
education today is "very important" or "fairly important."1 But a growing number of zoomers are
choosing to skip college and enter the job market due in large part to affordability concerns.2
College costs have been trending upward for the last two decades and currently average nearly
$110,000 for four years at an in-state public institution and $234,512 for four years at a private
university.3
High school seniors who pursue higher education should make sure they understand what they
are signing up for when they take out student loans. Private student loan interest rates are
primarily based on creditworthiness, so it is important to establish a good credit score before
applying.
Student loan debt is notoriously difficult to discharge, and loan rates are typically fixed for the
life of the loan. However, there are ways to manage student debts, such as interest rate
discounts for automatic payment withdrawals, paying extra principal, and enrolling in federal
programs such as the new Saving on a Valuable Education (SAVE) plan.
Paychecks Are Not Going As Far
While more recent high school graduates are opting not to attend college and instead enter the
workforce, this choice can present its own financial challenges.
On paper, Gen Z workers are earning more than some in the older generations, but much of this
comes from freelancing and rideshare jobs.4
Historically high inflation is eating into Gen Z's earnings. Zoomers have been disproportionately
impacted by rising prices and are spending more on essentials than preceding generations.
Gen Z is contending with 32 percent inflation in the past decade. Compared with young people
10 years ago, Gen Z is paying 31 percent more for housing, twice as much for car insurance,
and 46 percent more for health insurance.5 This can cause them to feel like they are starting
further behind financially than their parents and grandparents were at their age and cannot
afford the American Dream.6
Inflation deserves a large part of the blame for why Gen Z is living on a financial cliff. However,
members of Gen Z may share some of the blame. Today's young people have a much "softer"
approach to investing and personal finance than previous generations. This approach is more
about personal growth and mental well-being in the here and now than it is about saving for an
uncertain future.
Three in four Gen Zers say the current economy makes them hesitate to set long-term financial
goals.7 Then again, this could be a "chicken-and-egg" scenario.
Credit Cards Are Not the Answer to Inflation
In response to higher inflation and its corollary, less discretionary income, Gen Z is racking up
credit card debt at an unprecedented rate.
Eighty-four percent of Gen Zers are using credit cards, research from TransUnion shows.8 And
roughly one in seven have maxed out their cards - more than any other generation.9 These
trends are particularly worrisome because credit card interest is at an all-time high of around 22
percent.
However, there are smart ways to use cards to build credit and earn rewards for an upcoming
trip or purchase. Having a balance available in an emergency can also serve as a temporary
self-funded loan. But in order to take advantage of these benefits, young adults need to
understand the consequences of using a credit card.
More Ways to Invest Than Ever
Younger investors are less confident that they can achieve above-average returns solely with
stocks and bonds. Thus, instead of engaging in traditional investment strategies, Gen Z shows a
greater preference for alternative investments such as crypto, private equity, direct investments
in companies, socially responsible investing, and automated or robo-advisor investing.10
When looking to invest, it is important that young adults have a good strategy in place. A longterm investment strategy that relies on buying and holding specific assets is one of the best
hedges against inflation.11 Passive investing almost always beats active investing, even among
money managers.12
Give Your Teen the Gift of Financial Literacy
The "real world" is often the crucible in which money lessons are learned the hard way. That
does not mean a young adult should go off to college or enter the workforce without a basic
financial education. Help your soon-to-be high school graduate establish - and meet - their
financial goals by scheduling a consultation with an advisor.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional Counselors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
