MW Welcome to the real world, class of 2025. Here are 5 money tips you haven't heard a million times.

By Genna Contino

Gen Z is budgeting and spending in nontraditional ways. Here's how to navigate new AI and fintech tools and save responsibly, according to financial experts.

Classes are wrapping up on college campuses and 2025 graduates are preparing to enter an increasingly difficult labor market as questions linger about the future of the economy.

Despite the volatility, young people are in a powerful position to shake things up. Gen Z is expected to globally accumulate $36 trillion in income over the next five years, according to data from Bank of America $(BAC.SI)$, making it "likely they will be among the most disruptive generations to economies, markets and social systems."

Young people are also managing their finances in new ways. Generative artificial intelligence can take on the tedious task of budgeting, and the growing buy-now-pay-later industry grants the power to purchase almost anything in installments.

MarketWatch spoke with money experts who offered advice on how to use the latest finance tools responsibly - and urged the class of 2025 not to forget the less exciting, foolproof personal-finance tips that can help build a strong foundation.

Make sure you have an emergency fund before doing anything else

More than a quarter of Gen Zers (27%) said they have no savings in 2025, according to a Bankrate survey. That's compared with 13% of Americans overall.

Gen Z is "more apt to not take traditional jobs. They are entrepreneurs, they want to be creators, they want to be in the arts, they want to travel and work anywhere," said David Carrara, senior financial planner at Citizens Bank $(CFG)$. "They may not have life insurance or health insurance. So for them, they need a bigger safety net."

Building up an emergency cash fund should be the first step any new graduate takes once income starts flowing in, TD Bank $(TD)$ wealth strategist Ashley Weeks says. He believes it's even more important than paying above the minimum on student loans, saving for a house and maximizing retirement contributions.

"Simply because life happens," Weeks said, "it's really easy for one unexpected expense to snowball into a debt cycle that throws off your long-term financial plan and wrecks your credit score."

Generative AI can save time with budgeting - but be wary of privacy concerns

Using generative-AI platforms such as ChatGPT to budget can save time and simplify the process. After typing in your income and listing expenses and saving goals, the chatbot will respond in a matter of seconds with a comprehensive budget that's comparable to what an actual financial planner would create.

However, financial planners can offer empathy, ethical oversight and advice tailored to individual circumstances that can't be replicated by generative AI.

Use of generative AI for budgeting is more common among younger generations. Among Gen Z and young millennial respondents (ages 18 to 36) in TD Bank's financial-preparedness survey, 14% said they use AI platforms like ChatGPT to help with budgeting, compared with 7% of Gen Xers and 2% of baby boomers.

But be judicious about the personal information you're giving these chatbots. Data integrity is the biggest concern with generative AI, Weeks noted, and airing personal data in a public or unencrypted forum can increase the risk of identity theft and financial fraud. Avoid inputting intellectual property, bank-account information, credit-card numbers, financial statements, Social Security numbers and passwords into large language models.

"When you put your financial information into a system and have it spit back data at you, that stuff is stored and it goes somewhere," Weeks said. "What are the uses, and how is that system making money off of whatever product that it's selling?"

It's also important to note AI platforms can provide misleading or false information, known as "hallucinations." Before using advice from a large language model, it's never a bad idea to check with a financial professional or someone you trust first.

Make a plan for paying down student-loan debt

Graduates who borrowed money to pay for school might be feeling overwhelmed by the student-loan debt that comes as a package deal with their degree.

While Gen Z has the lowest average student-loan debt balance, according to the Education Data Initiative, their debt is also growing the quickest, at a compound annual rate of 6.72% Gen Z is also the second-largest generational segment with student debt, representing 28% of all student-loan borrowers.

The most important thing, of course, is keeping up with minimum payments. Once your emergency fund is set up and you're covering all your other expenses, then you can build extra student-loan payments into your budget to reduce the balance.

Refinancing to get a lower interest rate or different loan term is an option, Citizens Bank's Carrara said - but be mindful that if you refinance out of a federal student loan and into a private one, you might forgo some of the flexibility that comes with federal loans.

Congressional Republicans are also working to overhaul the federal student-loan program, but don't count on blanket forgiveness.

See more: Trump administration eyes changes to student-loan repayment plans

"I certainly would not pray and hope that there's some sort of forgiveness that's coming and then neglect [the debt] for that reason," said Rick Nott, managing director at Angeles Wealth Management.

If you rely on buy-now-pay-later loans, stay vigilant

The scope of buy-now-pay-later loans has significantly expanded in recent years. You can even order takeout in installments now after Klarna (KLAR) and DoorDash $(DASH)$ announced a partnership in March.

Buy-now-pay-later is especially popular among younger generations: Gen Z and millennials make up 60% of Affirm's $(AFRM)$ user base, according to Vishal Kapoor, the company's senior vice president of product.

This option can make it possible for new graduates to cover big purchases that come with the transition to adulthood, such as furniture for a new apartment. The most common buy-now-pay-later purchases by Gen Zers were clothing, technology, home decor and even groceries, according to a LendingTree (TREE) survey. A third of Gen Z users said they've used these loans at the supermarket.

But do your research; look for a loan term that offers flexibility and keep an eye out for unexpected fees.

"These fees might be sneakily labeled as 'reminder fees' or 'snooze fees,' but they're ultimately just junk fees," Kapoor said. "Consumers should always review the fine print before choosing a pay-later provider."

Some finance experts are skeptical about the growing buy-now-pay-later landscape for this reason.

From the archives (February 2024): People think buy-now-pay-later is helping them improve their credit. They're wrong.

The loans are "probably one of the more insidious forms of consumer debt," TD Bank's Weeks said. "It's often packaged as an interest-free way to acquire some product. But the problem is, if you miss their scheduled payment, they're going to jam you with either an exorbitant interest rate or lots of fees."

Certain buy-now-pay-later providers such as Affirm, PayPal (PYPL) and Splitit don't charge fees, but interest rates and credit limits vary depending on the type of loan.

Some companies have responded to concerns about buy-now-pay-later by providing educational materials to customers on how to use these services responsibly, and by engaging with regulatory bodies that could eventually shape industry rules.

'There's no shame in renting'

While 78% of Gen Zers still regard homeownership as part of the American dream, according to data from Bankrate, housing affordability remains a significant challenge.

Some graduates might be eager to put down roots - but Mark Hamrick, senior economic analyst at Bankrate, advises not rushing into a decision you might regret.

"There's no shame in renting," Hamrick said. "When one is essentially unsettled - meaning, 'I don't know if I'm going to be here that long' - and with the changes you have in the housing market, you don't want to have a lot of transaction costs."

See more: 'Discouraging': Frustrated sellers are cutting house prices by tens of thousands of dollars as buyers grow more selective

Once your emergency fund is built up, you have enough for a down payment and your credit score is high enough to qualify for the best mortgage rate, you're in a better position to begin house hunting.

As soon as you buy a home, "the clock starts ticking on when you'll have to start paying for appliance replacements and roof repairs," Hamrick said. But homeownership can still be very rewarding.

"It's still the primary path to wealth creation in the United States," Hamrick said, "for better or for worse."

-Genna Contino

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May 17, 2025 10:00 ET (14:00 GMT)

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