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Why Gen Z should care about inflation

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The inflation tiger is roaring. Older people can hear it. How about younger ones? Inflation could, after all, be the biggest blow to their finances in their lifetime.

They don’t seem hugely concerned. According to polling by GfK, Generation Z is totally ‘chill’ about inflation. Older generations, meanwhile, are scarred by the last inflation spiral of the 1970s — a brown-tinged decade of power cuts, unemployment and grim donkey jackets. To younger people, that’s ancient history. Growing up in an era where inflation has averaged 2 per cent, they’d be forgiven for zoning out when they hear ‘back in the day…’ or when news reports reveal that inflation has spiked to 4.2 per cent — a peak not seen since November 2011.

The reality is that Gen Z doesn’t really know what inflation is, let alone whether it’s back with a vengeance. But inflation bites the young hardest. Recent research from Demos and Yorkshire Building Society found young people typically spend more than twice as much as the over-fifties on housing costs and basic bills, both inflationary sore spots, equivalent to £1,300 more per month. Nearly half also report having ‘poor financial resilience’ due to too much debt and not enough savings.

‘There’s an app for this now.’

Some argue that inflation (and a higher base rate) is a young person’s friend, not foe. It erodes debt, makes savings more attractive, and raises wages. It might even bring house prices into reach. Well, that’s a rather optimistic ‘read’, to use another Gen Z buzz-word. Borrowers can only fix interest rates up to a point, with better deals reserved for those with established credit profiles. Also, the big banks are much quicker to pass on rate rises to borrowers than to savers. The housing market is widely predicted to slow down or even flatline if the base rate rises to its expected rate of 1 per cent by the end of next year.

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