The Financial Trap: Why Our Generation Is Set Up to Struggle

Introduction

As the world moves forward, financial stability for younger generations seems to be slipping further out of reach. While economic reports often highlight increasing wages and job opportunities, these figures don’t reflect the full picture. Rising costs, debt dependency, and the shift to subscription-based services are making it harder for Gen Z and future generations to achieve financial independence. If trends continue, we could be facing a financial crisis comparable to the 2008 recession.

The Reality of Rising Costs and Wages

1. Inflation vs. Wage Growth

1. While wages have increased over time, they haven’t kept pace with inflation.
2. According to the U.S. Bureau of Labor Statistics, real wage growth (adjusted for inflation) has been stagnant for years.
3. Example: In 1980, the average college tuition at a public university was about $1,000 per year. Today, that number has skyrocketed to over $10,000 per year, even though the minimum wage has not increased at the same rate.

2. Cost of Living Is Outpacing Earnings

1. Housing, healthcare, and education costs have all risen significantly.
2. Example: The median home price in the U.S. in 2000 was around $165,000. Today, it’s over $400,000, making homeownership nearly impossible for young adults without massive debt.
3. Rent prices have also soared. The national median rent increased by 19.3% between 2021 and 2022 alone (Apartment List Data, 2022).

3. The Burden of Student Debt

1. College tuition has reached record highs, forcing students to take on large loans.
2. As of 2023, the average student loan borrower in the U.S. owes around $37,000 in debt (Federal Reserve).
3. With interest rates on student loans increasing, many graduates spend decades paying off their education, delaying milestones like buying a house or starting a family.

The Subscription Economy: A Never-Ending Expense

1. The Shift from Ownership to Renting Everything

1. Nearly everything has transitioned to a subscription-based model, turning one-time purchases into monthly expenses.
2. Examples:
3. Entertainment: Netflix, Spotify, and game services like Xbox Game Pass.
4. Software: Adobe, Microsoft Office, and other essential tools now require monthly payments instead of a one-time purchase.
5. Basic Needs: Even cars and appliances are moving toward subscription models, with BMW charging a monthly fee for heated seats.

2. The Psychological Trap of Small Monthly Fees

1. Companies price subscriptions to feel “affordable” (e.g., $9.99 per month), but when added together, they create a significant financial drain.
2. Example: A person paying for Netflix ($15), Spotify ($10), Microsoft Office ($7), and a gym membership ($50) is spending over $1,000 annually—without even considering necessary expenses like rent and insurance.

Privatization and the Growing Financial Burden

1. Healthcare and Insurance Costs Are Soaring

1. The U.S. has one of the most expensive healthcare systems, and costs are rising every year.
2. Example: In 2000, the average health insurance premium was $2,471 per year. Today, it’s over $7,000 for individuals and over $22,000 for families (Kaiser Family Foundation).
3. Without employer-sponsored insurance, many young people are forced to pay out-of-pocket or go without coverage.

2. Education Costs Are Becoming Unaffordable

1. Public funding for higher education has declined, leading to increased tuition costs.
2. Example: Countries like Germany and Norway offer free or low-cost university education, whereas U.S. students accumulate massive debt just to get a degree.

Are We Headed for Another Financial Collapse?

1. The 2008 Parallels: Debt and Overreliance on Loans

1. Before the 2008 crash, people relied heavily on mortgage loans they couldn’t afford. When the housing bubble burst, it triggered a global recession.
2. Today, young people are relying on debt for education, housing, and daily necessities, setting up similar conditions for economic instability.
3. If too many people default on student loans, credit card debt, or mortgages, it could trigger another financial crisis.

2. The Looming Housing Crisis

1. With home prices out of reach and rent prices rising, many young people are stuck renting indefinitely.
2. If housing prices continue to inflate while wages stagnate, we could see a repeat of the 2008 collapse, where defaults lead to a market crash.

What Can Our Generation Do?

1. Financial Literacy is Key

1. Understanding how money works is crucial. Schools don’t teach this, so self-education is necessary.
2. Recommended books:
3. Rich Dad Poor Dad by Robert Kiyosaki
4. The Psychology of Money by Morgan Housel
5. I Will Teach You to Be Rich by Ramit Sethi

2. Avoid Unnecessary Debt

1. Loans should only be taken for necessary expenses, such as education or real estate.
2. Avoid credit card debt by paying off balances in full each month.

3. Build Assets Early

1. Investing in stocks, real estate, or starting a business can help build long-term financial security.
2. Platforms like Robinhood and Fidelity allow young investors to start with small amounts.

4. Create Multiple Income Streams

1. Relying on a single job is risky. Developing side hustles, freelancing, or passive income sources can provide financial security.
2. Examples of side hustles:
3. Selling digital products
4. Freelancing on platforms like Upwork
5. Starting an online business

Conclusion

The financial landscape is shifting, and unless significant changes occur, Gen Z is on track to struggle more than previous generations. High costs, rising debt, and the transition to subscription-based services make it harder to achieve financial independence. While systemic issues need to be addressed at a larger scale, individuals can still take steps to secure their financial future by learning, investing, and finding new ways to generate income.

The key is to stay aware, prepare early, and adapt to the evolving economy. The more we understand and take control of our finances, the better chance we have of avoiding another economic crisis and securing long-term stability.

By Brayal Valdez.