Gen Z: The Rise of Financial Savvy and Investing
Generation Z, or Gen Z, is rapidly growing up, with more members of the generation finishing school and beginning their careers. As their income expands, Gen Z’s financial habits are attracting attention. Contrary to the stereotype of young people frivolously spending their money, Gen Zers are taking a cautious approach to their finances and using their paychecks to secure a better future.
A survey by the CFA Institute found that more than half of Gen Z respondents were already investing, with 82% of American Gen Z investors starting before they turned 21. This is significantly higher than the numbers for millennials and Gen Xers who began investing at the same age. Furthermore, a survey by Bankrate found that nearly 90% of Gen Z investors actively make trades in response to economic factors.
Gen Z’s financial goals extend beyond current economic conditions. The CFA Institute survey showed that more than half of them are investing to secure their retirement. Financial advisors estimate that Gen Z will need around $3 million for a 20-year retirement, which is a high benchmark. However, 66% of Gen Zers surveyed by the Transamerica Center for Retirement Studies have already started saving for retirement, putting away a median of 20% of their annual salary.
Rise of Retail Investing
Access to financial products and services has increased significantly for Gen Z, allowing them to easily enter the world of investing. Growing up in the digital age has made Gen Z comfortable with using investing apps and online platforms. In fact, the CFA Institute report revealed that 65% of Gen Z investors use investing apps, compared to 55% of millennials and 38% of Gen X investors. Financial advice from social media platforms such as YouTube and TikTok has also been a major influence on Gen Z’s investment decisions.
These digital tools have made investing more accessible for Gen Z. Traditional financial advisors often have complex processes and poor user interfaces, which can overwhelm individuals unfamiliar with investing. Online platforms provide a user-friendly experience and valuable information, making it easier for Gen Z to start investing.
FOMO Investing
The online culture around money and investing has further fueled Gen Z’s interest in investing. Financial influencers on social media platforms like TikTok and YouTube inspire young people to get involved in the stock market, promising quick gains and success stories. This fear of missing out (FOMO) has led to impulsive investments by a significant number of Gen Z investors.
While the influence of finfluencers has motivated many young investors, blindly following their advice can lead to poor investment strategies. Gen Z investors must be cautious and conduct their own research to make informed decisions. It’s important to learn from mistakes and have the time to recover, as investing involves risks.
Saving for the Future
Despite the risks, Gen Z understands the importance of saving for the future, particularly for retirement. Their experiences and observations of the challenges faced by previous generations have led to a greater sense of urgency when it comes to financial planning. Gen Z has seen the impact of financial crises on their parents’ and grandparents’ retirement plans, which has motivated them to start saving early.
A survey by the Transamerica Center for Retirement Studies found that Gen Z started saving for retirement at a median age of 19, earlier than any other generation. This is reflected in the higher percentage of Gen Zers contributing to workplace retirement plans compared to previous years. Many young adults are aware of the uncertainty surrounding retirement, with a significant number fearing that they may never be able to retire.
Despite the challenges faced by previous generations, Gen Z has opportunities for financial growth and has learned from their elders’ experiences. Their familiarity with digital tools and resources has allowed them to become more involved in investing. With a long time horizon ahead, Gen Zers are taking steps towards securing their financial futures through careful planning, early saving, and cautious investing.
