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Does Generation Z understand savings and investments?
HomeNewsDoes Generation Z understand savings and investments?

Does Generation Z understand savings and investments?

Staff Writer
Staff Writer
January 31st, 2023
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Sayit quietly, but Millennials are becoming old news. The world’s media has hadplenty of fun at their expense over the years, laughing at everything fromtheir 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’remarried or partnered, they have stable jobs, and they’ve finally got theirhouses after all. They might still pop up on the internet with the occasional‘OK boomer’ to irritate their elders, but they’re no longerthe new kids on the block. Over the next year or so, you’re going to see thefocus 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.

Thejob of a financial adviser is unquestionably going to get harder in the yearsto come. Part of that will be down to increasing regulation, and caps oncommissions and bonus payments. The other part might be down to the fact thatthe younger people they’re trying to sell to simply don’t care about whatthey’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 ofthe window, and so they’ll presumably have to fall back on savings when they’reolder. There’s a problem with that. More than half of them don’t evenknow whether they have any savings or not. 

Foranybody over the age of 30, even thinking about that scenario might bring youout in a cold sweat, but for Gen Z, it’s a way of life. They put their cardinto 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 youlose all the money you have to spend, you simply shrug your shoulders, shut theonline slots website down, and carry on with your day. If the research welinked you to above is to be believed, Gen Z either finds out they have savingsto withdraw, or they don’t, and they shrug it off just as easily. That shouldset alarm bells ringing for anyone whose job relies on people caring about whatthey 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.

Withoutbeing able to buy a house, that leaves Gen Z with the option of renting. Thatcosts even more per month than buying a home, and so it chews into theirmonthly income even more than a mortgage would. If they want a car on top ofthat, their monthly income drops even further. Cars, too, have experiencedhyperinflation in price over the past few decades. So has the cost of gas – andthat’s forecast to increase in the future, too.

Infact, just about everything costs more as a percentage of monthly and annualincome than it used to, and there’s more ‘stuff’ that people are required orexpected to have. It’s hard to imagine anybody living without the internet athome and a smartphone now, but neither of those things existed in themid-1990s. Add both of them together, and you’re looking a $100 per month ormore. 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 aperson being able to save or not.

Thinkabout the order in which you dealt with your expenditures before you firstconsidered savings, or paying anything into an investment or pension account.Your first priority would be to ensure all of your critical household billswere paid. After that would come grocery shopping, and basically fuelingyourself to stay alive. Third on the list would be your car and the gas thatgoes in it. If you have any money left over after that, you might want toconsider spending a little on fun or entertainment. You have to find yourenjoyment somewhere after all. By the time all of this is paid for, the sadtruth is that the majority of Gen Z don’t have anything left over.

Evenif the statistic that half of Gen Z don’t know whether they have any savings ornot is true, it doesn’t indicate that they don’t know that savings orinvestments exist. It’s just that they’re totally inaccessible products. Theydon’t have the disposable income to consider them, and so they don’t take thetime to learn about them. A financial adviser trying to sell a 25-year-old aninvestment product probably has about as much chance of making a sale assomeone trying to sell them a rocket to the moon – it isn’t relevant, becausethey 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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