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. 

The post Gen Z characteristics: how this generation will redefine finance in the next five years appeared first on The Motley Fool UK.

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Cyber Monday is just around the corner, so I thought I would gather up some advice to make sure that you get your online shopping done in the most convenient, financially wise and safe manner. The dreaded shopping hangover? Not this year, folks. 

Let’s dive in!

Do:

Shop with a plan 

Whoever you’re shopping for this year, make sure you make a list of all the things you need to buy before you start spending, and — I cannot stress this enough — make a budget! These two simple things will allow you to curb unnecessary spending, which tends to skyrocket during this time of year. 

Get online early and beat the (cyber) rush  

Beating the rush on Cyber Monday looks a whole lot different than on Black Friday; you can stay in pyjamas and be planted on the couch with a cuppa. Brands usually start their online sales on the weekend between Black Friday and Cyber Monday. So get online on Saturday or Sunday, rather than on Monday itself, to make sure what you want is still in stock through the rush. 

Be mindful of your impact on the planet and others 

This also goes for any other day of the year, but it’s good to reevaluate this notion with increased spending. Make sure to keep in mind the stuff you already own and try not to over-accumulate in order to limit your ecological footprint. Do also take a second to reflect on the values of the company you are buying from. Would you be supporting this company if it weren’t for the deal? 

Spread out your shopping between Black Friday and Cyber Monday 

Remember that list I mentioned earlier? Go through that list and spread out your purchasing between Black Friday and Cyber Monday. You might get better deals on one day or the other. 

A good rule of thumb is this: big-ticket items, such as large appliances and electronics, usually have better deals on Black Friday. Apparel, small appliances, toys, and online-only brands usually have the best deals on Cyber Monday. 

Don’t: 

Get excited and spend recklessly

Don’t forget: nearly everything is on sale during Cyber Monday, so don’t fall for good deals on things you do not need. Your financial goals do not just disappear during this time of year, so be careful not to get too excited and spend recklessly. 

Before you hit the “place order” button, ask yourself this: “would I be buying this item if it wasn’t on sale?” 

Buy from untrusted websites, or those without secure payment method options

Don’t take this lightly! Shopping scams are on the rise. A recent study by Mortar Research and Barclays found that there was a 17% increase in the number of people reporting shopping scams after 2020’s holiday shopping season, with an average loss of £538. 

Make sure to only buy from websites that you trust, and never put your card information on a site without a secure payment option. If you have a gut feeling that something may be a scam, whether it’s a SMS promotion or a deal that just seems too good to be true (an Xbox will cost you more than £30, even on Cyber Monday!), please do more research before entering your information. 

Buy using a debit card 

Instead, use a credit card when making your Cyber Monday purchases. Programs such as Visa’s Zero Liability Policy protect card users from paying out of pocket for unauthorised transactions, which can make sure that you have an extra layer of protection if something goes wrong. 

Spend more than you can pay back 

Speaking of credit cards… Although they are a safer method of spending money online, it’s easier to spend more on them than you may intend. Make sure to only spend as much as you can pay back and save yourself from consumer debt that you might regret once the holidays are over. 

Assume you are safe from scams after you receive your packages

Scammers don’t sleep. Remain vigilant against impersonation scams even after Cyber Monday, as scammers may pretend to be calling from your bank or credit card company regarding your recent purchases. If you have doubts about a phone call, hang up and dial the official number of the bank yourself. If it wasn’t in fact them, make sure to let your bank know about the details of the attempted scam so that you can remain protected in the future. 

In short, budgeting, planning ahead of time, and taking precautions to shield yourself from fraud will go a long way to make sure that you avoid a shopping hangover. I hope this helps. Happy shopping! 

The post Cyber Monday 2021: important dos and don’ts! appeared first on The Motley Fool UK.

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In the 2020-21 financial year, the outstanding student loan balance in the UK stood at a whopping £178 billion, and an average loan balance of £28,000 going into repayment.

As you may already know, student loan payments are taken out of a graduate’s salary by their employer when their income exceeds the payback threshold set out by the government. If self-employed, loan holders must pay their dues at the end of the tax year.

But repayment may be looking differently in the 2022 tax year. As first reported by The Financial Times, HM Treasury and the Department for Education are said to be making plans to drop the payback threshold by more than £4,000. This could not only mean that you might start paying back your loans sooner than you anticipated, but if you’re already earning above the threshold, you could be due to pay more each year.

Here’s everything you need to know about the potential changes and how they may affect your finances in the upcoming tax year.

Repayment plan thresholds

There are currently 4 different types of student loan repayment plans in the UK, with the majority of graduates falling into Plan 2 (those who are English or Welsh and started an undergraduate course in the UK after 1 September 2012). The payback income threshold for this category remains at £27,295 per year before tax and other deductions.

Once your income exceeds this threshold (meaning you are earning more than £524 a week or £2,274 a month), 9% of the amount you earn over the threshold is deducted from your pay cheques. However, with a proposal of a lowered income threshold understood to be as low as £23,000, graduates with current incomes falling between £23,000 and £27,295 will be having unexpected loan payment deductions from their pay cheques in 2022.

This proposal is said to be in line with the government’s efforts to save up to £2 billion per annum. As it does each year, the repayment income threshold is scheduled to change on 6 April, though the changes have never been so drastic to date. 

How much you could be paying with the proposed changes

Today, a recent graduate from higher education earning £27,295 per year would not have any deductions from their pay cheque. So, let’s take a look at what a £23,000 payback threshold would mean for this person, as well as for a loan holder earning just over £23,000 and £35,000 per year.

The proposed changes may affect graduates’ annual net pay by hundreds of pounds. As more announcements are expected to be made in the upcoming months, it may be a good idea to be one step ahead and start thinking about what these changes could mean for your finances in the new year.

The post Graduates: you may have to start paying back your student loans sooner than you think appeared first on The Motley Fool UK.

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You may have seen “COP26” floating around the news world in recent weeks. Hosted in Glasgow this time around, COP is an annual United Nations “Conference of the Parties” aimed to unite the world in tackling climate change.

Although the conference has convened 25 other times to date, the term “net-zero” is just now coming into sharp focus. In fact, right before the conference started, the UK government published its detailed net-zero 2050 strategy. But that’s not all: Chancellor ​​Rishi Sunak also announced during the conference that “the UK will be the world’s first net-zero financial centre”. To get there, UK financial institutions will be required to publish their net-zero transition plans to a designated task force by 2023.

Here’s everything you need to know about how your bank’s net-zero efforts may affect you.

What does a net-zero bank look like?

First, let’s cover what net-zero is and what it means for a financial institution to become it.

An organisation is “net-zero” if their total greenhouse gas (GHG) emissions are equal to or less than what they remove from the environment. To do this, a business would have to first calculate their emissions, and decrease them as much as possible. Then, whatever remains, they must invest in GHG capture and removal technologies to come down to net-zero. That, or get down and dirty to plant some trees that store the carbon naturally!

Sounds simple enough, right? Not quite.

For all types of businesses, but for financial institutions especially, measuring GHG emissions in the first place can be extremely tricky. This is mainly because the calculation must not only include their direct and indirect emissions, such as the carbon released from their cars and the emissions associated with the electricity they purchase but also the emissions up and down their value chain. For your bank, this means that any emissions related to their loans and investments must be accounted for.

The resulting spreadsheets are not for the faint of heart…

How would your bank going net-zero affect you? 

Under the new proposed rules, your bank may already be making plans to become net-zero. Luckily, this will not affect your day-to-day matters directly, and your deposits continue to be safe up to £85,000 under the Financial Services Compensation Scheme.

Past chequing/savings accounts and credit cards, however, things may start to look a bit more different over time. Depending on the specific plans your bank adopts, rates and conditions of their existing loan and investment products may change.

With the transition, your bank’s bottom line would no longer be to just make more money. It would also be to take care of the environment.

Keep in mind that financial institutions going net-zero is still unchartered territory, and real-life examples don’t quite exist yet. However, here are some predicted changes that may come your way in the next decade.

Loans and mortgages

If your bank is making efforts to become net-zero, any vehicle loans, residential mortgages and general-purpose loans may come with clauses and/or incentives for you to decrease the emissions related to your newly acquired funds. This would require complex accounting methodology on your bank’s end, as well as new products, incentives and/or requirements for their customers to keep their emissions low.

For instance, banks may incentivise buying electric vehicles by having attractive ‘electric vehicle’-only loan products. Or they may no longer finance homes that are energy-inefficient without solid retrofit plans in place and even offer you retrofit financing options to complement those plans. You may also have to disclose how exactly you plan to use your loan and the emissions you predict to emit.

New investments

Any new investments you make through your bank would be placed in fully ESG-backed portfolios, and your money would not be invested into any oil or gas stocks going forward. Such portfolios may have different returns on your investment at first. However, the more the economy turns towards responsible investing, the quicker your returns will stabilise.

Existing investments

With time, it may also be necessary for your existing investments to be transferred to more ESG backed portfolios, although the fees associated with this change will likely be taken on by your bank. However, if you continue to have funds invested in fossil fuels in the next decade, it is quite possible that your portfolio might take a hit as more banks shift towards responsible investing as part of their net-zero strategies. It may be a good idea to get ahead of this curve by adopting an ESG investing approach now.

The post COP26: your bank might be making plans to become net-zero. Will it affect your finances? appeared first on The Motley Fool UK.

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