Even in comparison to their young millennial counterparts, Gen Z’s characteristics are different in many ways. Born between 1996 and 2010, Gen Z is anywhere between 11 to 25 years old in 2021. They account for about one-third of the world population and have an estimated spending power of $143 billion. Not to mention they’re also on their way to inherit billions more in the next decade.
A couple of Generation Z’s characteristics, like their close relationship to their phones, are obvious to spot from the outside. But what we don’t see as easily, such as their financial habits and mindset, are to redefine our world in the next five to ten years.
Here is a rundown of Gen Z’s financial habits and what to expect in the next five years as they grow into their own and take the financial world by storm.
Gen Z money habits
The straightforward truth is that Gen Z are stressed about money. Many of them are entering the job market in a highly volatile market, and a recent study showed that 72% of Gen Zers reported experiencing pressure when it came to their financial futures.
The anxiety that they feel means that, even at a young age, Gen Z are regularly thinking about money and are conscious about their financial future. Perhaps as a result of this, they’re known to be the most financially savvy generation yet, and fiercely budget as a result. A study by Clearpay shows that 63% of Gen Z are saving more each month than when their parents were the same age. In addition, they view debt as very bad and go the extra mile to avoid it. Instead, many of them are involved in side hustles to supplement their savings.
Gen Z investment habits
Independent and extremely tech-savvy, Gen Z care deeply about their financial futures and invest early. With phones attached to their hands at all times, they’re in tune with financial news, check their portfolios regularly and care about the social and environmental initiatives of the companies they invest in more than older generations.
When it comes to investing, Gen Z are very risk-tolerant. They’re the first generation to be investing so early and independently, and a study by Barclays shows that nearly half of these young investors plan to invest short term (between 2-5 years) and are making speculative investments. They also may be over-investing in hopes of maximising their returns; 59% report that a substantial investment loss would have a fundamental impact on their future or current lifestyle.
Gen Z banking habits
It may come as no surprise to you that Gen Z prefers digital, easy and quick solutions to their banking. They are a mobile-first generation and are contributing to the decline in bank branch networks all over the world. As the leaders of using digital solutions, they are nearly three times more likely to use banking and investment apps in comparison to older generations (59% vs 19%). In addition, although Gen Z are very avoidant of debt, they are 50% more likely to use “buy now, pay later” schemes such as Klarna and Payl8r in comparison to older generations,
How Gen Z will affect the world of finance
This tech-savvy, early investing generation will only continue to make up a larger and larger portion of consumers and investors in the next five years. As a result, here are a couple of things you can expect:
- Fintech will grow tremendously in order to keep up with Gen Z’s demands. Merely digitising current experiences won’t drive growth. Offering brand new, innovative and cheap banking/investing solutions will be key;
- Physical branches will have less and less importance for banks;
- Contactless payments and “buy now, pay later” systems will become more popular;
- Gen Z will likely be the most investment-savvy generation yet as their experiences at a young age will set them up for success in their futures. Most are likely to manage their investments themselves;
- Because Gen Z’s environmental and social concerns are high, companies will have to show more than just good financial returns in order to retain Gen Z’s investments and business.
