Young savers are embracing a new form of self-directed investing and are actively investing online. For advisors, connecting with this group of next generation clients presents a unique challenge and opportunity.
Who is Generation Z?
Gen Z, those born between 1997 and 2012, totaled 67 million in 2020, representing about 20% of the total population, according to the Census Bureau. Gen Zers put a higher emphasis on personal savings, care about social issues, and making a positive impact.1
Gen Z has the fastest-growing income worldwide. Globally, their income is expected to grow to $17 trillion by 2025 and $33 trillion by 2030, representing a very substantial 27% of the world's income and surpassing that of Millennials.2
And Gen Z has money to invest and decisions to make. They started saving for retirement at age 19, earlier than other generations, compared with Millennials (age 25), Gen Xers (age 30) and boomers (age 35). Fully 70% of Gen Zers have started saving for retirement.3
Living in a digital world
Gen Z's relationship with money is based on a purely digital experience. Why use cash when there's Venmo? Why use a traditional brokerage when there are platforms to choose that require no minimum and offer free trades? Why hunker down and do fundamental research on valuations when TikTok finfluencers deliver rapid, timely recommendations?
Even with an early start at saving, only 43% of Gen Z are optimistic about reaching their retirement goals, compared with 53% of all other generations. And 51% said they are not sure what 401(k) investments to choose to have enough to retire.4
Sources of financial information and education vary and include everything from YouTube to TikTok and other social channels.
Gen Z's primary sources of financial education
Source: GoBankingRates.com
Many Gen Zers are more interested in cryptocurrency or NFTs than traditional, more transparent investment vehicles. A recent survey found Gen Zers are saving more than they are spending, and identified their preferred investments. Some may surprise!
Gen Z's preferred investments
Source: GoBankingRates.com
A 2021 Harris poll for CNBC found that 19% of Gen Z often or exclusively use investments focused on ESG (environmental, social, and governance) factors, second only to Millennials (30%), and compared with 16% of Gen X and 2% of baby boomers.
Gen Z says they need advice
Concurrent with moving ahead on their own, many Gen Zers acknowledge they need advice. The majority of Gen Zers (71%) in a recent survey said there are financial topics they want advice on but don't know where to find it. About two thirds of respondents said a financial plan based on their goals would be an important factor if they were considering a financial advisor.5
For some, the pandemic moved them to hire an advisor. In a study of investors who began working with an advisor since the pandemic began, Gen Zers topped the list. The biggest segments of new advised-clients were Gen Z (22%) and Millennials (22%), compared with 19% of Gen X and 10% of boomers.6
The opportunity for advisors
Advisors looking to connect with Gen Z need to meet them where they are, learn about emerging investment vehicles and styles, and structure their practice to make connections easy and efficient.
- Understand Gen Z's needs. 35% cite paying off student debt and 33% cite saving for retirement as financial priorities.7
- Learn about crypto, NFTs, and other investment ideas. Be able to express the relative risk/return profile of newer, more volatile vehicles versus traditional mutual funds, ETFs, and individual securities.
- Get up to speed on ESG investing. 95% of GenZers are also interested in ESG (environmental, social, and governance) and impact investing.8
- Provide an organized, frictionless experience. Use technology like DocuSign, Zelle, and Venmo to eliminate paper documents and check writing. If allowed by your firm, default to texting over email when communicating.
- Carefully craft your online image. With some easy updates and routines, you can reach out to these active investors looking for information and advice.
- Optimize your LinkedIn profile. Ensure that your profile photo is current, casually professional, and inviting. Fill in your complete educational and professional experience.
- Fine tune your value proposition. Use keywords and phrases in your LinkedIn Summary to communicate your ability and readiness to work with Gen Z clients.
- Start sharing articles. Focus on key investment topics that are of interest to Gen Z investors, like student loan debt, saving for goals such as a home purchase, or the growth of ESG investing.
1. Deloitte, 2021.
2. Bank of America, 2020.
3. Transamerica Retirement Survey 2021.
4. Schwab, 2021.
5. Intelliflo, 2021.
6. Northwestern Mutual, Harris Poll 2021.
7. Transamerica Retirement Survey 2021.
8. Morgan Stanley, 2019.
329737 5/22
Putnam Retail Management.
FAQs
Young savers are embracing a new form of self-directed investing and are actively investing online. For advisors, connecting with this group of next generation clients presents a unique challenge and opportunity.
What does Gen Z think about money? ›
Money dysmorphia
Social media has a negative effect on self-esteem, and it can make us feel financially behind, even if we aren't. Roughly 43% of Gen Z have a distorted view of their finances and insecurity about meeting their money goals.
What is Gen Z's attitude toward technology? ›
Gen Z sees technology as an extension of themselves, using it for entertainment, connection, and activism. Thus, you can see Gen Z reliance on technology for more than ever!
What is Gen Z's source of income? ›
“As a result, Gen Z is getting creative about ways to make money with many turning to social media and online platforms to earn some extra cash. Digital side hustles can be a great way for young people to take control of their finances and start making progress toward their financial goals.
What do Gen Z spend the most money on? ›
46% of Gen Z spent more on fashion than anything else in 2022 (5WPR) Gen Z was the only generation to have clothing and fashion as their top spending category. 30% of Gen Z spent more on beauty and personal care than anything else, far more than any other generation.
Are Gen Z motivated by money? ›
Through a compilation of Gen Z interviews and studies from Bain & Co, CFA Institute, EY, and others, the article concludes that the youngest generation in the workforce is motivated by competitive compensation and quick career growth, and is quick to move on to other opportunities if they don't get that.
What is the Gen Z term for money? ›
Scrilla: Sometimes spelled “skrilla,” slang for cash or currency. Cheese: Similar to cheddar, refers to money as a means of survival. Guap: Especially popular among Gen Z and Gen Alpha, it's pronounced 'gwop' and it means a ridiculous amount of money, similar to “rack” or “milli.”
Are Gen Z really tech-savvy? ›
Gen Z has never had to wait for dial-up internet or use a payphone to call home. Because these younger consumers grew up online, marketers tend to approach Gen Z as chronically online, tech-fluent, and social media-obsessed. But today's young adults aren't just tech-savvy, they're tech natives.
Why is Gen Z the smartest generation? ›
Gen Z has honed the skill of sifting through vast amounts of data, fostering a culture of self-education and critical thinking. This ability to quickly access and evaluate information may contribute to the perception of increased intelligence.
What is the mentality of Gen Z? ›
It makes them more receptive to criticism, resilient in adversity, and dedicated to lifelong learning. For Generation Z, the growth mindset isn't just a belief; it's a guiding principle that frames challenges as stepping stones to success.
Zoomers, however, are much better off than millennials were at the same age. The typical 25-year-old Gen Z-er has an annual household income of over $40,000, more than 50% above baby-boomers at the same age. Gen Z's economic power was on display at a recent concert by Ms Rodrigo in New York.
Which generation is the richest? ›
Millennials stand to become the richest generation in history, after $90 trillion wealth transfer | CNN Business.
Why do so many Gen Z have side hustles? ›
Many Gen Zers have a full-time job and a side hustle, partly because they're wary of getting burned by their employers: 'They've seen it happen to their parents, to millennials' Moonlighting used to be considered a sign of poor financial planning, an admission that one's current salary wasn't enough to live off.
Is Gen Z struggling financially? ›
Young members of Gen Z are struggling more financially today than Millennials did at their age 10 years ago, according to a new study published last week by the credit reporting agency TransUnion.
What do Gen Z mostly buy? ›
Gen Z spending habits show they care the most about fashion, makeup and beauty products, technology, and their pets. This is perhaps due to their young age and few major bills.
What Gen Z likes the most? ›
Gen Zers are more likely to cite streaming video, streaming music, and playing video games as daily activities compared with the general adult population, per a May 2023 Morning Consult survey. They're also less interested in traditional TV and listening to the radio.
Which generation cares most about money? ›
Aligning on money is all the more pressing for younger generations, who are earlier on in their relationships and careers—nearly half (49%) of Gen Zers view financial compatibility as more important than physical compatibility. That's compared to 40% of millennials, 35% of Gen Xers, and 30% of baby boomers.
How does Gen Z view finance? ›
Young Adults Turn to Social Media for Financial Guidance
A Forbes Advisor survey of more than 1,000 millennials and Gen Zers in January 2023 pointed to these top five topics: investing in stocks and bonds (57%), personal budgeting (51%), passive income (49%), reducing debt (40%) and building or improving credit (37%).
What does Gen Z struggle with the most? ›
Gen Z Struggles With Mental Health
According to McKinsey, over half (55%) of Gen Zers report having either been diagnosed or receiving treatment for a mental health condition, compared to 31% of people aged 55 to 64, who have had decades longer to seek and get treatment.
What percent of Gen Z is financially literate? ›
Lack of Basic Financial Knowledge: A survey conducted by the Financial Industry Regulatory Authority (FINRA) found that merely 24% of Gen Z respondents could correctly answer four out of five basic financial literacy questions.
