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Gen Z Budgeting

Planning now can pay dividends later.

Article published: September 09, 2025

Need to find a budget that works for you?

A financial advisor can help you come up with a budget and detailed plan that suits your lifestyle and keeps the focus on progress towards your goals.

For young adults who have recently become financially independent, creating and sticking to a budget can be confusing. We recently talked to young adults about their questions regarding budgeting, including the long- and short-term benefits and how to create your first budget.

Edelman Financial Engines advisors Kay Russel and Kelli Smith are here to answer these questions and to talk Gen Z through the benefits and strategies for budgeting.

 

WHY IS BUDGETING IMPORTANT?

How can a young adult’s spending habits impact their future? Kelli emphasizes that many investment opportunities – such as 401(k)s and high interest savings accounts – can enable compound interest. That means, any interest you earn on your savings can gradually earn interest itself. As a result, the earlier you put money into these accounts, the more growth they could see in the long run.

“When you're younger, that’s the time in the market that gives you the biggest bang for your buck. So, you have to start saving and building wealth as young as possible for a purchase 10 or 15 years from now, or retirement, 40 or 50 years from now. That is a non-negotiable for building wealth, because you're going to have to save two, three, sometimes four times as much if you start saving later in life,” Kelli says. “You must spend less than what you can afford, because you have to have the savings wiggle room in there, and that's how you can build your wealth.

The years leading up to and through retirement can be expensive – Kelli recommends keeping your future self in mind before making any unnecessary purchases.

“The younger generation is like, ‘I'm not working until I'm 65 or 70. Well, that's great, but you have to pay for healthcare. And you've got to somehow figure out how you're going to pay for your living expenses.” Kelli says. “Social Security, Medicare, they're probably not going to be expanded enough to maintain our lifestyles when we retire. So, we have to do that ourselves. Our younger selves have to take care of our older selves.”

 

HOW TO MAKE A BUDGET

So, how should young adults navigate budgeting? To create your initial budget, Kelli recommends taking an honest look at how much you are currently spending on essentials and non-essentials. From there, ask yourself: Is this how I want to be spending? Is every dollar going to where I want it to go? If not, Kelli says you should create a financial plan that reallocates your spending to where it will most benefit you. Your new plan can form the foundation of your budget.

“A budget is just a matter of how you prioritize your dollars. The money coming in is finite. So, if you bring in $2,000 a month, you have to know where you're spending it. You have to put value on every single dollar,” Kelli says.

Of course, if your living expenses are simply higher than your income, budgeting can only do so much. Kelli reminds Gen Z spenders that, especially as a young adult, there is room to grow your base income to better suit your needs.

“Do not underestimate your greatest asset: your earning potential. If you're bringing home $2,000 per month and you have a lifestyle that costs $3,000, then you need to figure out how to bring in $3,000 – and some extra to cover your savings. That means you work more, or you advance at your job, or you get another certification, and you move your way up.”

Most young adults are in the very early stages of their career. While Gen Z will hopefully be landing their dream jobs – and paychecks – in a few years’ time, Kay recommends prioritizing saving when you’re first starting out. Meal prepping instead of getting takeout, and resisting impulse purchases, can go a long way towards building your initial financial portfolio.

“When you're younger, that's when you have to delay those instant gratifications so that you can save more for the future. And the great thing is that, because you have the time, the earlier you start investing, the more time you have to compound. But, it's hard to do when your income level is not there yet,” says Kay. “The biggest thing is to be a little more defensive than offensive right now and then when your career changes and you're making more money, you'll be able to save more with the opportunity to grow more.”

 

HOW TO STICK TO IT

As a young adult, the pressure to accompany friends to expensive destinations, restaurants and events can be intense. Being honest about your finances is also difficult, especially for young adults – there’s a pressure to appear as though your spending money is endless. To combat these expectations, Kelli recommends Gen Z look into the concept of “loud budgeting” – not only maintaining your budget but being open and honest about your budget and financial goals to your peers.

“Loud budgeting is not being ashamed to say, ‘Nope, I'm not spending money on that, because I choose to put my money here instead. It's not that I can't afford it. I could, but then it comes at the expense of something else that I really want to do’,” Kelli says. “I think Gen Z would really benefit from being able to kind of push back and set some boundaries, to tell people, ‘You’re not going to push your ideals and your priorities on me. I choose to spend my money on essentials, and I put any extra money into my investment accounts.’”

 

THE BENEFITS OF SAVING YOUR MONEY

Aside from increasing your savings and living comfortably, what are other benefits of carefully budgeting your money? Well, Kay says that one benefit is being able to support and be generous towards your loved ones when they need it most. Careful planning and saving in your early years can put you in a comfortable place financially in your later years, which may enable you to do just that.

There are so many benefits to getting started early on budgeting, including establishing a financial plan that suits your current situation and evolves with you as your career and goals change over time – something a financial advisor is ideally suited to help you with. And seeking the guidance of a financial advisor isn’t just for the Boomers. Gen Z would be wise to connect with that expertise early in their financial journey too.

This material was prepared for educational purposes only. Although the information has been gathered from sources believed to be reliable, we do not guarantee its accuracy or completeness.

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