Yahoo Finance Is Living Alone Too Expensive for Gen Z? 5 Ways To Save for Your Own Place
Only 17.6% of people who rent a home or apartment lived alone as of 2022, according to National Census Bureau data. People may have various reasons to share an apartment, from cohabitating to caring for an aging family member. But for many, the decision to have a roommate comes down to cost.
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“Everyone I know in the city has a roommate, or they live with a partner, but nobody just has a place to themselves,” Brooklyn renter Liam Nee told Axios. Nee shares a two-bedroom apartment with a friend, according to the website.
Other renters aren’t so lucky as to have their own room. Axios reported that TikToker Piper Phillips shared a one-bedroom apartment in New York City with her boyfriend and a friend.
The problem plagues young people in cities besides New York, too. Places like Charlotte, North Carolina, Jersey City, New Jersey, and Miami, Florida, were deemed unaffordable for most individuals based on The Economist’s “Carrie Bradshaw index,” a reference to “Sex and the City” and the New York-based writer’s spacious abode.
So, what’s Gen Z to do? Moving back home with parents might be one solution to save money in the short term. Axios reported that the number of Americans ages 25 to 34 who live with their parents jumped by 87% over the past two decades.
But if you’re determined to have your own space – whether that’s an apartment or a house – it can be done if you create a plan and focus on your goal.
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1. Clean Up Your Credit
Whether you’re getting ready to buy a house or want to move into a different apartment, your credit score matters. Mortgage lenders and landlords, alike, run credit checks to determine if you’re a good risk.
You can obtain copies of your credit reports from all three credit bureaus — TransUnion, Equifax, and Experian — for free once a year. Some credit cards and bank accounts also provide free credit monitoring. Before you begin your hunt for a new home, check your credit report, clean up any errors and work on paying down debt to improve your credit utilization ratio.
“Checking your credit score early on and ideally prior to getting serious about purchasing a home will provide the opportunity to improve it, should you need to do so,” Liz Ewing, chief financial officer at Marcus by Goldman Sachs, told CNBC.
2. Know How Much You’ll Need To Move
When you’re saving to pay for a big expense, it helps to have a number in mind. Scope out homes or apartments in your area to determine how much you’ll need to cover your down payment and closing costs on a house or your first month’s rent, last month’s rent, and security deposit for an apartment. Don’t forget to add in any moving expenses.
Of course, these numbers will change as the market evolves, but setting a goal can help keep you on track.
“When taking into account the down payment, your income, expenses and current debts, you can establish a savings goal and make an actionable plan to reach that amount,” Ewing told CNBC.
3. Evaluate Your Budget
If you’re looking to buy a home, you’re probably staring at a pretty big number for a down payment. Even a security deposit on a new apartment can be costly without a roommate.
Look at your budget and find ways to cut discretionary expenses. That could mean eating out less frequently, spending less on groceries or canceling a few streaming services.
Don’t forget to allow yourself a little money to splurge, however. If you make your budget too strict, you’re less likely to stick to it.
4. Get a Second Job or Side Gig
Many young Americans already work two jobs or a full-time job and a side gig just to cover everyday expenses. According to data from the U.S. Bureau of Labor Statistics, 8.4 million Americans worked two jobs in October 2023.
If you don’t have a side gig right now, consider making extra money on a platform like TaskRabbit or as a driver with DoorDash or Uber. Take all your earnings from that gig and put them into a high-yield savings account to bolster your new home fund.
5. Choose the Right Savings Account
With interest rates for savings accounts above 5% right now, your money can grow faster than you might think. Based on your timeline for moving, you might put your money into a high-yield online savings account or a CD. A CD might be a good option if you already have some savings socked away and can secure a bonus rate for six months or a year.
However, experts like Ewing recommend a high-yield online savings account. “It may be worth considering opening a high-yield savings account just for your down payment and setting up automatic direct deposits into the account on a monthly basis to save the money before having the chance to spend it,” she told CNBC.
Final Note
Owning a home or even moving into an apartment on your own is a big step when it comes to financial responsibility. A clear plan, a little bit of discipline and the right savings account can go a long way toward helping you reach your goal.
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This article originally appeared on GOBankingRates.com: Is Living Alone Too Expensive for Gen Z? 5 Ways To Save for Your Own Place
