Gen Z Money Habits & How Wealth Management Needs to Evolve

The Great Recession changed everyone’s perceptions of financial markets, retirement planning, and the need to save money. The dramatic overnight capital losses redefined the lives of Millennials, Gen Xers, and Baby Boomers. When it comes to Gen Z however, the negative impact of finances on so many people’s lives has defined their worldview of money. While other generations have had to adapt to these changes, young people have had to completely alter the course of their futures. Many millennials even opted to put off starting families because of the strain of trying to enter the workforce or compete in a tight job market right out of college. 

Imagine for a minute what it must have been like to be a pre-teen in 2008 with barely any concept of money markets, and with everyone older than you in a constant state of panic. Gen Z, following this group, maybe even more impacted, and their money habits are naturally going to be different. Here’s a look at Gen Z finances and how wealth management can support them.

How does Gen Z view spending?

In an age of Apple products, expensive smartphones, and powerful mobile apps, it’s easy to assume everyone’s spending more. However, that’s just not the case with Gen Z. Name brands aren’t as important to them as they were to Gen X. They spend in the consumer market but make more frugal choices with their money. With the creativity of mobile app developers, they have convenient tools to save right from their smartphones. They are more practical with how they spend money by living on less and they tend to forego buying in excess.

An increased global and social consciousness

Gen Z money habits are also part of the social and global consciousness of their generation. They are more likely to try and limit the impact that they have on the environment. Greta Thunberg’s rise to global fame through her environmental activism is a prominent example of how Gen Z is already influencing the world. They want to have a smaller carbon footprint by saving more of what they earn and buying fewer things. 

An alternative approach to career and college debt

Newer job opportunities have led Gen Zers to take different approaches to get into their chosen career. Tradition has always stated that the first step to getting a job is to pursue a 4-year college degree. The Great Recession left thousands of people without jobs and loads of college debt they were unable to pay off. Even after the economic recovery, as wage increases lagged, many still found themselves struggling to pay rent, save for retirement, and make student loan payments. 

They wised up. College degrees won’t necessarily take you where you need to go, like so many people believed they would. A recent study by OnePoll concluded that 39% of college graduates would be willing to spend a week in jail to erase student loan debt. The Gen Z generation has learned how to take an alternative path to specialize in valuable skills without frightening college debt.

Helping the risk-averse investor plan for the future

Gen Zers are much more risk-averse than previous generations, so getting them to invest in higher-risk investment products is tougher. Even if equity and alternative investments can generate higher returns, it’s a bit trickier to take the standard approach of retirement planning and asset allocation. One size doesn’t fit all for these teens and 20-somethings because they simply do not want to have to play catch-up with preparing for retirement.

A better approach to wealth management for Gen Z money habits is to start with investment vehicles you would recommend to Baby Boomer investors. Savings accounts are great, but there many other low-risk, low yield investments they can diversify into without worrying about much market risk. Dow Jones Industrial Average (DJIA) blue-chip stocks are worth exploring. Target date funds are a great ERISA-protected option as well. So, you can explain to your Gen Z investor how fund managers are required to follow strict guidelines that protect the retirement accounts of these investors.

As with any investment decision, seek the advice of an established wealth advisor such as SD Mayer Advisory Services. Help your Gen Z investor get off to a strong start with a plan for investment education that can last a lifetime. Further along in life, if they choose to marry or have children, a skilled wealth manager can guide them through adjusting investment allocations and starting college savings plans. As their income grows and they advance in their careers, they’ll have the foundation they need to preserve their wealth according to plan.

The wealth management team at SD Mayer is committed to supporting younger generations in reaching their financial goals. Contact us to get started with an initial consultation today.

Image Credit | Dean Drobot | Shutterstock