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