• Gen Z members, born between 1997 and 2012, have been hit harder by higher prices than all other age groups.
• Relief appears to be on the horizon, with some of those price increases poised to slow in coming months.

Freshly minted college graduates are grappling with more than just trying to land their first jobs.

There’s the cost of rent. And eating out with friends. And gasoline. And car insurance.

Gen Z members (born between 1997 and 2012) have been hit harder by inflation than all other age groups, and the effects could cast a shadow over their financial health for years to come, according to studies by Moody’s Analytics and TransUnion, the credit reporting agency.

“Gen Z’s experience with inflation has been different than all other generational cohorts,” says Moody’s economist Matt Colyar. “It’s been hotter.”

Young adults, ages 12 to 27, are bearing the brunt of a historic spike in prices over the past few years that has financially strained most Americans. That's because Gen Z's incomes are lower because they’re just entering the workforce. And they’re big consumers of some of the chief inflation drivers, like housing and meals out, Colyar says.

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But relief appears to be on the horizon, with some of those price increases poised to slow in coming months.

How much has inflation slowed?

Overall inflation has eased substantially from a 40-year high of 9.1% in mid-2022, according to the Labor Department’s consumer price index (CPI). But after dropping last year, it picked up in early 2024 and has been stuck at about 3.4% since autumn.

Moody’s crunches government data on the share of income each age group spends on various goods and services tracked by the Labor Department. It uses that information to come up with a generation-specific CPI that's roughly similar to the broader index.

What generation is most affected by inflation?

Based on that generation-specific measure, yearly inflation in March was running about half a percentage point higher for Gen Z than for every other cohort − millennials, Gen X, baby boomers and the "silent" and "greatest" generations − a significant difference.

Besides earning lower incomes than other age groups, young Americans buy a disproportionate share of products and services that have soared in price. For instance, they devote nearly 20% of their income to rent compared to 7% for the average American, Moody’s data shows.

Few Gen Z members own their homes, which means those who aren’t still living with their parents or other relatives are probably renting. Rent has jumped 5.4% in the past year and 21% since early 2021, the CPI shows. And housing broadly has accounted for 36% of the rise in consumer prices in recent months.

Young people also spend 5.5% of their income on dining out, compared with 4.5% for the average person; 5.3% on gasoline versus an average of 3.2%; and 2.6% on auto insurance versus an average of 2.3%, the Moody’s analysis shows.

Auto insurance has leaped almost 23% in the past year, and young Americans typically pay higher premiums because insurance companies believe they’re more likely to get into accidents and make poor decisions.

'Living paycheck to paycheck'

Hannah Mains, 22, who graduated this month from Auburn University in Alabama, has two part-time jobs: marketing manager for a staffing firm in the clothing industry and stylist for a clothing subscription service.

But her pay for the 25 hours a week she logs is barely enough to cover her sharply rising bills for utilities, car insurance, groceries, dining out and other items, even with her parents covering the rent for the off-campus apartment she continues to share this summer. Her auto insurance premium has climbed $200 to $300 a year in the past few years, she estimates.

“I still find myself living paycheck to paycheck,” Mains says, and hasn’t been able to build any savings.

Mains, who majored in apparel merchandising and media studies, has applied to hundreds of public relations and marketing jobs but has had just a few interviews in a cooling labor market. New grads are competing not just among themselves but with laid-off white-collar workers in fields such as tech and consulting, according to a LinkedIn report.

Although she eats out with college friends three or four times a week, she has been gravitating to restaurants and bars that offer discount specials.

At the end of the summer, she plans to move back in with her parents in Atlanta and hunt for a PR or marketing job in New York City or Los Angeles. She isn’t sure how she’ll afford the astronomical rents.

“It’s definitely disheartening, but it’s just how it is."

What is the average credit card debt held by Gen Z?

The additional costs that Gen Zers face have led them to amass more credit card debt than millennials at the same age, according to a TransUnion study last month. Gen Zers ages 22 to 24 had an average credit card balance of $2,834 late last year, compared with an inflation-adjusted $2,248 for millennials at the same age in late 2013.

And 1.6% of Gen Z card holders were 60 or more days delinquent on their payments in late 2023, vs. 1% of Millennials a decade ago.

“Gen Z is struggling more than millennials did 10 years ago,” says Michele Raneri, vice president and U.S. research head at TransUnion.

Although Gen Zers and millennials each dealt with a crisis – the Great Recession and pandemic downturn, respectively – inflation has left Gen Zers more debt-burdened, Raneri says. In 2021 and 2022, they benefited from COVID-19-related stimulus checks and other federal aid. But that money largely has run dry, forcing many in that age group to turn to credit cards or other types of loans, she says.

The government’s financial cushion is gone, but the spending may have “turned into a habit (they) can’t afford,” Raneri says.

Such debt can weigh on young adults and affect their credit scores for years because they haven’t yet built credit histories, says Charlie Wise, TransUnion’s senior vice president and global research head. Today's historically high interest rates make that debt particularly onerous, Raneri says.

The outlook, however, isn’t all gloomy for young Americans.

Gen Z’s median inflation-adjusted wages have been higher than those of previous generations at the same age. And they’ve risen faster, at least partly offsetting the higher costs, Colyar says, citing Federal Reserve data. Many work in industries − such as restaurants, hotels and retail − that have boosted pay sharply in response to pandemic-related labor shortages.

Also, young adults tend to switch jobs more often than older colleagues to take advantage of bigger raises, Colyar says.

“Gen Z went to work when there was a ‘help wanted’ crisis,” he says.

What is the forecast for inflation in 2024?

He says the cost of services hit hardest by inflation should rise more slowly or stabilize in the coming months. Rent for new leases has dropped, but that change has been slow to filter through to tenants on existing leases. It should happen, though, by the second half of the year, Colyar says.

The rise in car insurance costs should also ease in the months ahead, he says. New car prices have dropped recently, and that should moderate insurance premium increases, Colyar says.

At the same time, Gen Zers devote much less of their income to health care, an expense that's projected to rise dramatically this year.

“Relief is on the way,” Colyar says.

Paul Davidson covers the economy for USA TODAY.