High-earning Gen Z still has empty pockets

"My income is quite stable and it’s also much higher, probably double, than my aunts, uncles, and older siblings," said Linh, a project consultant at an advertising company in Ho Chi Minh City.

She blames her frequent budget overruns on her unrestrained spending habits and the high cost of living in the city. Linh explains that her expenses on food, transportation, rent, electricity, water, shopping, and entertainment worry her.

A 2022 Deloitte survey of 14,808 Gen Z individuals (born from 1997 onwards) across 46 countries, including Vietnam, found financial instability to be the predominant issue facing young people today.

The survey also pointed out that 29% of Gen Z respondents cited their struggles with living costs. 46% stated their earnings were barely sufficient to pay their bills, and only 25% claimed they did not worry about monthly finances.

The 2021 "State of Banking and Financial Wellness" study by banking financial technology company Backbase revealed that 67% of Vietnamese participants felt stressed about their financial situation. It also noted that Vietnam had the highest percentage of respondents who admitted to lacking money management skills across ten Asia-Pacific countries surveyed.

A man taking selfie with his female friends holding shopping bags. Illustration photo by Freepik

Ngoc Han, a 25-year-old interior design consultant in Hanoi, earns between VND30-50 million (US$1,223-2,038) a month, "much higher" than her civil servant parents’ 10-million-dong incomes. Despite that, she often struggles with living expenses.

"Despite having a high salary, I can hardly save anything," she confessed. "I even have to borrow money from friends some months because I don’t have enough for living expenses."

Han’s financial challenges are exacerbated by her high living costs, including nearly VND10 million for rent in Hanoi. Other expenses she has to pay monthly include transportation, groceries, and hanging out with friends. All of these expenses combined, she said, account for half of her monthly income.

Ngo Thanh Huan, director of personal finance at investment consulting and asset management firm FIDT, observes that the younger generation is more prone to wasteful spending than previous ones.

"People typically saved between 30-50% of their income in the past," he noted. "For those under 30 earning below VND40 million a month now, saving even 20% is challenging."

Huan attributes the difficulty in saving among Gen Z-ers partly to their upbringing in families with fewer siblings, where they received considerable support from their parents and grew accustomed to a higher standard of living from childhood.

He also mentions the numerous temptations the youth now have to spend money on, including shopping, partying, socializing, dating, traveling, and entertainment, such as concerts, which inevitably lead to increased expenditures.

This observation aligns with Pew Research Center data, which suggests that high living costs and mental health issues prevent Gen Z-ers in the U.S. from affording a "normal" life like their parents’.

While Linh and Han seemed to fall into the category of those vulnerable to high living costs, the financial struggles of Tuan Cong, a 24-year-old architect in the coastal town of Da Nang, stem from the latter reason listed by Pew Research Center. He says his income from regular and freelance jobs is spent on hobbies for stress relief.

"My monthly income reaches nearly US$1,000 with the current exchange rate," Cong stated, emphasizing that it is three times his parents’ income.

However, he admits that the higher income brings more responsibilities and work for him, affecting his health and sleep quality. Cong recalls a period when he experienced sweaty hands and was diagnosed with peripheral neuropathy due to anxiety, long-term insomnia, and stress, which led him to take up long-distance cycling and subsequently start collecting racing bikes.

He notes that some in his collection are valued at nearly VND100 million each. He mentions that certain bikes also necessitate unique tools and additional parts, which obviously cost more money, too.

"In pursuit of relaxation and happiness, I find myself without any savings at month’s end."

However, Huan warns that such alleged spending for better mental health, as in Cong’s case, can trap young people in a vicious cycle where immediate gratification through spending undermines savings and early investment opportunities, leading to further stress from financial burdens.

To improve their financial management, Huan recommends young people follow five key ideas:

Primarily should ensure they spend less than what they earn, aiming to save at least 10% of their income every month.

Secondarily, it is advised to set aside sufficient emergency funds to cover unexpected events and risks for themselves and their dependents as soon as possible, Huan says.

Thirdly, in addition to maintaining disciplined savings habits, young people are encouraged to educate themselves on investment opportunities. Starting this learning process early is advantageous, as it mitigates the impact of potential losses that could be more significant later in life.

"For instance, a loss on a 500-million-dong real estate investment would be less impactful than a loss on a 5-billion-dong investment," explained the financial expert.

Fourth, Huan recommends that young adults create a comprehensive financial plan that helps them to consider all aspects when making financial decisions ranging from loans, investments, andexpenditures.

Lastly, it is crucial to regularly review and adjust this financial plan to ensure it remains aligned with their evolving financial goals and circumstances.

Without adopting these measures, young individuals risk falling behind and failing to achieve their financial goals.

"I dream of buying a house in Hanoi, but all of the apartments I have seen cost several billion dong per unit," Han lamented, indicating that she plans to remain in her rented room in Hanoi for a few more years before moving back to her hometown. There, she intends to seek employment that provides a workplace nearer to her parents’ home, allowing her to live with them.

"Buying a house in Hanoi seems too difficult [for me]," she concluded.