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Does Generation Z understand savings and investments?

Say it quietly, but Millennials are becoming old news. The world’s media has had plenty of fun at their expense over the years, laughing at everything from their love of avocados to their difficulties in getting on the property ladder, but the majority of Millennials are now settling down into their 30s. They’re married or partnered, they have stable jobs, and they’ve finally got their houses after all. They might still pop up on the internet with the occasional ‘OK boomer’ to irritate their elders, but they’re no longer the new kids on the block. Over the next year or so, you’re going to see the focus of the media (and advertiser) shift to their successors, Gen Z.

Gen Z has grown up in a completely digital world. They don’t remember a time when smartphones and the internet didn’t exist. The idea of knocking on someone’s door to see if they’re home is as alien to them as VHS tapes. They belong to a different philosophy and a different perspective. Perhaps worryingly, they also don’t seem to be overly concerned about investments or savings.

The job of a financial adviser is unquestionably going to get harder in the years to come. Part of that will be down to increasing regulation, and caps on commissions and bonus payments. The other part might be down to the fact that the younger people they’re trying to sell to simply don’t care about what they’re trying to sell. Even though life insurance is cheaper for younger people, they’re showing no inclination to buy it. That’s one form of protection out of the window, and so they’ll presumably have to fall back on savings when they’re older. There’s a problem with that. More than half of them don’t even know whether they have any savings or not. 

For anybody over the age of 30, even thinking about that scenario might bring you out in a cold sweat, but for Gen Z, it’s a way of life. They put their card into an ATM, and they treat it as if they’re on an online slots website. Sometimes you get money when you play online slots, and sometimes you don’t. If you lose all the money you have to spend, you simply shrug your shoulders, shut the online slots website down, and carry on with your day. If the research we linked you to above is to be believed, Gen Z either finds out they have savings to withdraw, or they don’t, and they shrug it off just as easily. That should set alarm bells ringing for anyone whose job relies on people caring about what they have in the bank.

Part of this might be down to the fact that just staying alive costs Gen Z more than it cost anyone who came before them. Much as the older generation likes to play down the difficulties that their children and grandchildren face financially, those problems are very real. Back in the 1950s and 1960s, it was possible to buy a reasonable family home for a few thousand dollars, and certainly no more than double your annual income. Nowadays, that figure is more like four or five times the salary of someone working in an average job, and even then, it only happens for people who have a perfect credit report. Credit reports didn’t matter in the 1980s – a simple ‘yes’ or ‘no’ from a bank manager would suffice. Here and now, one late credit card payment two years ago could disqualify you from getting a deal.

Without being able to buy a house, that leaves Gen Z with the option of renting. That costs even more per month than buying a home, and so it chews into their monthly income even more than a mortgage would. If they want a car on top of that, their monthly income drops even further. Cars, too, have experienced hyperinflation in price over the past few decades. So has the cost of gas – and that’s forecast to increase in the future, too.

In fact, just about everything costs more as a percentage of monthly and annual income than it used to, and there’s more ‘stuff’ that people are required or expected to have. It’s hard to imagine anybody living without the internet at home and a smartphone now, but neither of those things existed in the mid-1990s. Add both of them together, and you’re looking a $100 per month or more. For a young person trying to run a household on a strict budget, that $100 is a considerable chunk. That $100 might be the difference between a person being able to save or not.

Think about the order in which you dealt with your expenditures before you first considered savings, or paying anything into an investment or pension account. Your first priority would be to ensure all of your critical household bills were paid. After that would come grocery shopping, and basically fueling yourself to stay alive. Third on the list would be your car and the gas that goes in it. If you have any money left over after that, you might want to consider spending a little on fun or entertainment. You have to find your enjoyment somewhere after all. By the time all of this is paid for, the sad truth is that the majority of Gen Z don’t have anything left over.

Even if the statistic that half of Gen Z don’t know whether they have any savings or not is true, it doesn’t indicate that they don’t know that savings or investments exist. It’s just that they’re totally inaccessible products. They don’t have the disposable income to consider them, and so they don’t take the time to learn about them. A financial adviser trying to sell a 25-year-old an investment product probably has about as much chance of making a sale as someone trying to sell them a rocket to the moon – it isn’t relevant, because they don’t have the money to make it happen.

Gen Z will probably start buying financial products the moment that their income and expenditure scenario becomes more realistic and manageable. Until then, we shouldn’t consider them uncaring. We should consider them unfortunate instead.

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