Gen Z And Money
First things first, I am not Gen Z. I’m from the in-between generation that was transitioning from an analog world to a digital one. I’m a Xennial. Money and finances were the least of my concerns growing up. A latchkey kid from age 6, my concerns were how long I could get away with being at my buddy's house, playing his Nintendo until my thumbs were raw.
Computers were a thing, but DOS green was hardly impressive. The internet was becoming something, but no one was sure quite what.
The 90’s were an interesting time, especially growing up around Seattle when grunge rock turned the music scene on its head, and I loved it.
Somehow I ended up in the world of personal finance. It’s been a privilege doing what I do for as long as I have. 2022 marks my 20th year in the industry, 19 of those years working for a nonprofit debt relief organization.
I started out like many of my generations did, with a crash course in finances by opening our first checking accounts and immediately finding out how high a check could bounce. Now, I can say that I haven’t written a check in a decade. As a young adult, learning finances was trial by fire, so to speak. But I kept taking my experiences and learning from them.
Fast forward almost 25 years, and everything has worked out. I’ve enjoyed learning about and sharing information about personal finances, and so do many others.
Here’s what I understand about how Generation Z views money, based on experiences with my own Gen Zers, and data we’re currently uncovering.
Generation Z witnessed the fears and problems that stemmed from the previous generations. Many of them watched their Generation X parents struggle because of The Great Recession. Many of them had secure jobs and means, only for most of them to falter during the economic downturn.
On the other hand, they also watched Millennials who had to adjust to the onset of new technology. They watched the financial impact of those who prioritized spending and did not know the consequences of their actions. They saw the results of their struggles to pay student debt. Many Millennials also discovered the impact of financial planning on their own.
Generation Z grew up not knowing what life was like before smartphones and the internet. It allowed them to adjust and adapt fast. They saw how Millennials struggled with pursuing their dreams with limited job availability. Whether in college or the workforce, many consider availability and demand before anything else.
They are also not so keen on debt, with the majority opting for lower-cost higher education. Millennials save more money, but Gen Z takes on less debt. As witnessed by many today, this younger generation comes in with the knowledge of past mistakes, making them a wiser force to reckon with. The data shows the difference:
- 35% of Gen Z already have business plans or have started a business.
- Only 21% of Gen Z wanted to take student loans.
- 64% of Gen Z started researching and talking to others about financial planning.
- 75% of all Gen Z are willing to shift to another state if a job opportunity arises.
Gen Z Financial Literacy
One of the shifts in the behavior of this new generation is their concern about their finances. A significant part of Gen Z is aware of financial literacy and wants to become better at it. However, one of the biggest challenges they face is the source of their knowledge. Around 84% still rely on their parents and family for financial information.
While it can help to some degree, the information may be outdated, incomplete, or wrong altogether. The older generations had to learn the hard way. Others still have the same misconceptions. Even though Gen Z is beginning to learn at a young age, they have to broaden their horizons.
One of the ways they can do that is through the internet. The web provides a plethora of resources to draw from. There’s so much information out there that it’s all about separating the good ones from the rest. The good news is that today’s generation is savvy enough to understand when something online is genuine. Zoomers aren’t typically the ones to fall for scams and can navigate the internet towards their desire.
While their approach towards debt is positive, there is a possibility that Gen Z is limiting their capabilities by avoiding it. They need to learn debt management and the right way to use items like credit cards. There is a part of the population that’s already comfortable, but the majority is still learning.
Almost Half Of Gen Zers Want To Be Homeowners In Just 5 Years
While millennials have been considered the generation of perpetual renters, it appears that Generation Z or Zoomers do not plan to follow in their footsteps. In a new study from Rocket Homes, 86.2% of Gen Zers ages 18–24 have their sights set on homeownership, while 45% of this group plan to own a home in 5 years’ time. If these emerging home buyers could achieve this, they would be between the ages of 23 years old and 29 years old when they buy a home. While this might seem like Gen Z has an overly optimistic outlook, the data shows they know they have their work cut out for them and see multiple potential challenges on the horizon, but also very real rewards.
Zoomers Take Financial Responsibility Seriously
Financial responsibility is something older Gen Zers already seem keenly aware of. Of the respondents, 74.6% are routinely saving, with almost 10 percent specifically saving for a down payment. These Gen Zers are just entering the workforce and adulthood.
The fact that they have already started saving bodes well for their continued financial wellbeing and preparation for homeownership. Additionally, those saving for an emergency fund (20.3%), those saving just to save (14.3%), and those saving to pay off debt (11.3%) are taking steps to put themselves in a better financial position earlier in life. This could set them up to be better able to purchase a home when they decide to.
Gen Zers Perceive Financial Challenges As Their Biggest Obstacle
The ambitious timeline for Gen Z home purchases may make their future look bright, but they are mindful that the journey will not be easy. When asked what would make buying a house the most difficult for them, 73.9% replied financial constraints, with:
- 21.9% of this group does not feel they will have enough cash for a down payment
- 18.4% do not believe they will be able to find a house in their price range
- 16.1% of Generation Z is anxious about not having adequate credit
- 10.5% worry about excessive student loan debt
- 7% find the mortgage qualification process daunting
The 18.4% that cited difficulty finding a house in their price range may suggest that these individuals are aware of the supply constraints that have kept first-time homebuyers out of the market. At the same time though, it was discovered that 80.6% of Gen Z respondents underestimate how much it cost to purchase a home. As of June 2021, the median home in the U.S. costs $363,300 (St. Louis Federal Reserve). The average price Gen Z gave when asked what they thought their first home would cost was $223,468–38.5% below the actual median home value. While this relates back to Gen Z believing they won’t be able to find a house in their price range, it also brings up the need for further education and awareness around financing and housing costs that could help overcome financial challenges.
The good news — Gen Zers have choices to help them alleviate some of the problems ahead. Similar to their millennial predecessors, programs and grants are available to make homeownership more affordable. Since Generation Z has such a strong desire to purchase a home, we can expect these resources to be in high demand when they are made aware of them.
How To Achieve Your Financial Goals as a Member of Gen Z
I believe that the first thing that Gen Z needs to do to make the most of their situation is to stay proactive. They should not be afraid to ask questions and look for positive influences they can draw from. Even research online during free time can yield many results that can improve their financial literacy.
Of course, they’ll want to be vigilant about fake news and information. However, it’s nice to see the world clamping down on it, in a fairly collective manner.
I’ve never thought freedom of speech should be deemed freedom to deceive.
I’ve tracked countless false claims and scams over the years that have taken advantage of people seeking information to improve themselves and their situations.
You also don’t need to pay anything to access them. YouTube has hundreds of videos from people who’ve built their reputation as financially savvy. There are also online courses you can take. There is no more financial barrier like how it used to be during their parents’ generation.
While it may seem like there is a sense of urgency when building up wealth, it’s something you have to do long-term. Many people fall into the trap of get-rich-quick schemes, only to lose more money and time than they should have. You’ll find that many of those who’ve succeeded have gone through simple and even mundane paths.
From my experience, it all starts with a goal. What do you want to achieve financially? Some people are out to find stability. Others want to get savings or buy a high-ticket item. Whatever the case, learning will help you get the foundational principles that can affect how you use and view money.
It can lead you to unique opportunities and change your life. As long as you’re moving forward and staying diligent, you’re on a good path.
It’s unfortunate that we’re coming off a pandemic, and now a terrible Russian invasion of Ukraine that could escalate considerably further, pushing even more financial destabilization across the globe. I am hopeful though, that current and future generations continue to not filter out the noise and help each other avoid the mistakes previous generations made when it comes to their finances.
It’s a Steady Race
Not everyone can reach their financial goals fast, but it doesn’t matter. It can be easy to compare your situation with others, especially if you have the same interests. Regardless, not everyone starts on the same path and you shouldn’t allow your perception of them to affect your perception of yourself. Stay on your course and you’ll achieve your goals.
Thanks for reading, and if you have ideas for an upcoming story, or simply want to let me know your thoughts about this story, email me at rick@moneyfit.org.
Richard Munster
Sources:
https://everfi.com/blog/financial-education/how-gen-z-thinks-about-financial-literacy/
https://www.ypulse.com/article/2021/03/18/these-are-gen-z-millennials-top-financial-goals-now/
