A new financial world for Gen Z: what they (and their parents) need to know

I recently learned that my mum purchased her first home (with no assistance) at age 24. My largest purchase by age 24 was a MacBook. This partly comes down to some financially questionable decisions by me: I moved to London touting a degree in journalism. My mum lived in a rural area on the east coast of the US as an engineer.

But young people that made more practical decisions than me are still struggling to take the life steps their parents did in early adulthood. A portion of this comes down to the figures. Adjusted for inflation, people aged between 22 and 29 make 15% more than they did in 1999. But the average house price has jumped, already adjusted for inflation, 63% in that time.

This is discouraging, to say the least. Many young adults took the path they had been told would lead them to a comfortable life, or at least a life similar to the one they were raised with. But for many taking all the ‘right’ steps, it seems to be well out of reach.

A new financial path

When traditional paths don’t seem to be working, it’s understandable for people to start to look for alternative, and sometimes risky, routes for big rewards. Market research firm Ipsos found that nearly a fifth of Brits aged 18-34 have invested in cryptocurrency in the past year. Those who invested in Bitcoin a year ago would now be down 28.9%. While the cryptocurrency has had a growthy performance on longer time frames, returning 127% in five years, it remains an extremely risky asset, and highly volatile in the short term.

But it’s not all doom and gloom, and success doesn’t have to mean extreme amounts of risk. What it may take, however, is some reframing of goals, careful consideration of financial priorities, and using the one big advantage younger people do have - time - as a superpower.

Reconsidering the housing ladder

Owning property has been a hallmark of success in the UK for centuries, if not millennium. For past generations, homes were the largest contributor to growing wealth. While that price growth was a big benefit to previous generations that bought in, for younger generations, it means a big jump to cling onto the first rung of the housing ladder. As of January 2026, the average price of a first home was £226,000, according to the ONS. For those wanting to make a 10% down payment, that means saving up a pot worth £22,600. And for those hoping to achieve a deposit closer to 20%, saving up £45,600.

The ONS reports just 14% of ISA holders aged 25 to 34 to hold more than £20,000 in their account, and this does not include those aged 25 to 34 who don’t have an ISA at all. Many young adults will need help to make the deposit or will simply have to wait.

Waiting a bit might not be such a bad thing. A common rule of thumb is that someone needs to live in a home for 10 years for buying to outweigh renting. In years of life where there may be job changes, or a need for more space as people start a family, it’s likely many young adults will end up moving in this time. Owning a home also comes along with legal fees, repairs, and insurance costs that eat into savings even further.

Right now, the housing market is stagnant, with the ONS reporting no growth in prices in the past year, and a 0.4% decrease between February and March this year. This means that people aren’t necessarily missing out on growth by waiting to buy, and don’t face the prospect of higher mortgage rates.

Ultimately, purchasing a home isn’t just a financial decision. It changes day to day life too. It’s worth reflecting on if owning a home is truly something you want at this moment, or something you just feel you should do.

There is a danger that if you wait too long to get on the housing ladder, you could end up still paying off your mortgage into retirement, which is an unexpected cost for many. But equally, you could find yourself in this position by putting down a small deposit and accepting a hefty interest rate on the property. If buying somewhere you really want to live within your means and if you're overstretching the budget, it’s likely not the right choice.

Tackling student loans

A sneakier cost young adults face today is repayment of student loans, with borrowing students who graduated in 2024 facing an average debt of £53,000. But because repayments are automatically taken out of salaries after tax, it’s easier to forget the impact.

For those who started university between September 2012 and 2022, student loan repayments are 9% of your salary over £29,385. For someone on £50,000 a year, this would equate to nearly £1,855. This will continue to weigh on your salary until the debt is paid off and doesn’t receive any tax relief. In the meantime, the debt will continue to accrue interest.

Many people will pass the 30-year student debt expiration date before they pay it off, or 40 years for students on Plan 5 loans. There is the option to overpay debt to end this cost, but it doesn’t make sense for many. Those who are on the lower end of the earnings spectrum or foresee career breaks or part-time roles in their future, may be better off making the minimum payment and waiting for the rest to expire. High earners who plan to have a consistent career might be better off paying down the debt.

Parents with the capacity to do so, may consider offering their children help with their school fees to reduce loans, or putting money towards a down payment for a house. Both have upsides and there’s not necessarily a correct choice. Both free up income for young adults down the line as they near retirement age, either through a paid off mortgage or an additional sum in their pension that wasn’t lost to university fees.

Not everyone is interested in going to university. While graduates do still have higher salaries, it’s a shrinking gap. On average, in 2007, a graduate earned about £30,000 while a non-graduate earned £20,000. As of 2024, if inflation was based back to 2007 rates, graduates would be earning £26,500 while non-graduates would be earning £19,500. University is still offering an advantage based on these figures. But once factoring in other costs such as paying off student loans, it is worth serious consideration if there are other paths worth examining for those young adults that aren’t interested in university.

Time is on your side

The largest benefit that young adults have is time, and this is particularly important in terms of pension payments. With runways of 30 or 40 years until retirement, there is plenty of time to let compounding work its magic and investors might feel comfortable taking a higher degree of risk in their portfolio as there’s more time for the market to recover. It may seem like a strange area to focus on when there are other, more immediate financial commitments to tend to, but it is an area where just tucking a bit more aside can leave you far better off in the future.

You can calculate your current situation using AJ Bell’s pension calculator and play around with the figures to see what you’d need to reach your ideal lifestyle. These numbers are adjusted for inflation and salary increases, so you don’t need to try to factor those in yourself. Two of the easiest changes to make that can boost the value of your pension is upping your contribution and checking what your pension is actually invested in.

Often, pension providers will choose a default fund that is the same for everyone. But this is usually trying to mitigate some risk so those that are closest to retirement experience less volatility. If you have a long runway to retirement, you may consider looking at funds that offer greater return potential in favour of a bit more risk, since the market has more time to recover.

Let’s say Joe, a 27-year-old on a £50,000 salary is paying in the standard automatic enrolment amount of 5% each month using salary sacrifice and getting a 3% contribution from his employer. He already has a pot of £15,000. At 65, this would leave him with a pot worth £443,313 in today’s terms, assuming an annual return of 5%.

Joe wants more for his pension, so he increases his contribution by just 1%. He also looks at his pension account and finds he has been placed in a default fund that is 80% stocks and shares, and 20% bonds. He switches to an all-equity fund, which ends up returning 8% annually instead of 5%. By making these changes, he’d have £907,721 at 65. Taking advantage of work schemes like employer contribution matching can boost this even further.

That’s quite a comfortable sum for many people to live on in their retirement years. Financial futures are intimidating, and sometimes, discouraging. But thinking about what truly matters to you and focusing on those achievements rather than the ones you feel you ‘should’ do, can help. Ultimately, building wealth is about building the freedom to live the lifestyle you want.