Young adults are more mobile these days, and more likely to choose renting instead of buying a home. They move between jobs more frequently and need to be able to adapt quickly to changes in their employment situations. This became even more true during the pandemic, when many jobs were lost and others were changed to remote work or part-time positions.
Even before lockdown, though, the days were long gone when a worker would stick with the same company for decades, then collect a gold watch and a pension (what’s that?) at their retirement party. Prospects for work and finances are much less stable now. In the current environment, it’s probably not surprising to find that Generation Z is stressed out about money.
Today’s workplace and financial climates are only some of the reasons it’s important to Gen Z’ers to stay adaptable in their living situations. What may be surprising to learn is that renting instead of buying a home has a number of advantages.
This post is written by Molly Barnes, owner and operator of the Digital Nomad Life. Be sure to check her out!
The Advantages of Renting Instead of Buying a Home
Renting instead of buying a home may seem like a hassle and a waste of money, but it doesn’t have to be! How are Gen Z’ers adapting and making it work? Read on.
In 2019, a Bureau of Labor Statistics survey found that even the youngest Baby Boomers (born between 1957 and 1964) held an average of 12.3 jobs between ages 18 and 52.
Job-hopping has actually declined some since 2001 among younger people, but that’s in part because the number of gig workers has grown — especially during the pandemic, when gig work saw a 22% increase.
Remote workers and some contract workers, like delivery drivers and freelance writers, can function pretty much anywhere, so they have their pick of where to live. Those who want to pursue upward mobility by switching jobs, meanwhile, need the flexibility to change their living situation quickly. (Switching jobs is one of the best ways to get a pay bump.)
More than ever, Gen Z’ers are maximizing this flexibility by leaning into their evolving options, which means they stay ready to move house at a moment’s notice. Depending on the market, it can be a lot easier to give 30 days’ notice to a landlord than to sell a house. This flexibility helps them maximize opportunities to meet their financial needs.
2) They’re avoiding the cost of repairs and taxes
Owning a home comes with a lot of extra expenses you may not anticipate when starting out. In addition to the monthly mortgage, there are property taxes (which vary significantly from state to state) and the cost of repairs and maintenance.
If you own your home, you’ll have to pay for things like:
- plumbing repairs,
- a new roof,
- fixing or replacing broken appliances,
- landscape maintenance, etc.
These things can turn into a significant amount of money — money your landlord is responsible for paying if you’re renting instead of paying a mortgage.
That amount can be significant, and Gen Z’ers are recognizing how much they can save on the costs associated with homeownership by renting instead.
Renting also frees them up from having to do repair and maintenance work themselves. The time involved in these tasks also can be an important consideration, since more than half (58%) work nights and weekends if necessary (not to mention the alluring opportunity to make extra cash working overtime).
3) They’re investing differently
Instead of investing in real estate, younger adults are turning to other methods of making their money work for them. They saw what happened when the real estate bubble burst, helping to trigger the Great Recession, and they don’t want to be caught up in that kind of financial crisis themselves.
Investing…and credit scores…
Young people recognize the need to build credit, but they’re wary of building up debt. So they’re taking fewer risks by using tools such as secured card accounts that build credit but don’t create debt. Instead, the amount of credit they have is the amount of money they’ve deposited in their account. This way, they know they can cover an expense without overspending.
Three-quarters of Gen Z’ers plan to stay close to the family home so they can save by taking advantage of less expensive in-state tuition. Many are living with their parents until they graduate, but others are finding cheap rental opportunities in studio apartments and with roommates.
This gives them the flexibility once they graduate to pick up and go where the job market’s hot — a move they’re more than willing to make. In fact, 75% of Gen Z’ers are willing to move to another state for a job.
Speaking of roommates, that’s another advantage of renting. Buying a house with someone can be messy if you want to split things up. Renting together is a lot easier to untangle quickly. Again, it’s about flexibility.
Renting Instead of Buying a Home – Sometimes It’s the Smart Thing to Do!
All in all, renting instead of buying can provide any number of advantages for members of Gen Z (and others, really). From flexibility to cost savings, it’s a viable and often desirable option to pursue in the modern economy.
What about you? Are you renting instead of buying a home? Why or why not?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.