I was born in 1996, on the edge of the millennial/Generation Z line. My identity as a millennial or Gen Z-er completely depends on the source you’re reading. Weirdly enough, when discussing generational trends with professionals, the majority of questions I get (as the token young intern) are usually about financial planning for millennials and Gen Z, instead of my favorite Netflix series and fashion sense (or lack thereof).
My dad has been providing me with financial planning strategies and unsolicited advice ever since I vowed never to babysit in middle school. As soon as I swore off untaxed income, he made it abundantly clear that I needed a job and needed to start saving. Every generation has experienced their own struggle, or has seen friends and family struggle through the last recession. Did these experiences impact younger generations? How are they influencing young adults to plan for their financial future? Are they even thinking about retirement this far ahead?
Differences in Financial Planning for Millennials and Gen Z
Many millennials aren’t exactly getting the “American Dream” opportunities we’ve all imagined. Before you chalk it up to young people’s character flaws, remember that millennials (and Gen Z) are inheriting a wider gap between the rich and the poor. A combination of massive student loan debt and historically low wages has made it clear to millennials that financial security is not a guarantee. According to the National Institute on Retirement Security, about 66% of people between the ages of 21 and 32 have absolutely nothing saved for retirement (cue internal screaming). However, among the one-third of millennials who are stashing money away for retirement, the average account holds $67,891.
Concerned and confused by the financial planning habits of millennials? You’re not alone. Even our youngest generation is recognizing the financial discrepancies of their older siblings and choosing to take precautions now. Gen Z is ON IT when it comes to financial planning, and is focused on financial safety, saving, and control. While many adults are self-educated on personal finance strategies, 35% of Gen Z have attended a financial education program or seminar (while only 12% of millennials have). Unlike millennials, Gen Z is focused on preventing debt altogether, instead of the “I’ll make it all back (and more) later” mentality most millennials grew up with.
This trend can be observed in Gen Z’s attitude towards college education. In a 2016 Lincoln Financial study, researchers found that 70% of Gen Z-ers believe that student loan debt will make future financial planning a challenge. Many students are beginning to pay for college on their own dime. 38% of participants in the Center for Generational Kinetics study plan to work in college to offset costs and 24% will use their personal savings to help pay for college costs. 65% of millennial parents, now feeling the weight of college debt, have already started saving for their children’s future college funds.
Planning for Retirement
In the same Lincoln Financial study mentioned above, 89% of Gen Z respondents said they were optimistic about their financial future, compared to 83% of millennials and Gen X-ers and 78% of baby boomers. This optimism may be a result of the current market climate as well as an increased commitment to saving. At least 64% of Gen Z-ers reported having their own savings account versus 51% of older generations.
Though they are still in their teens and early 20s, Gen Z is already thinking seriously about retirement and starting to save. Compared to millennials, Gen Z is expecting less help from government assistance, and 12% are already saving for retirement. Remember that the large majority of this generation are still young students without real-world work experience, making their tendency to save that much more impressive.
What Does It Mean for Financial Services Marketers?
As both millennials and Gen Z-ers become huge stakeholders in the economy, consider the best way to connect with these rising generations and provide the appropriate financial services. Gen Z will make up 40% of all consumers by 2020 and their tendencies to save will open opportunities for investors and the banking industry.
Financial planning for millennials and Gen Z means different things to each generation. Understanding the areas to focus on when marketing financial services to them will become vital moving into the future. Don’t passively accept every description of “lazy” and “digitally obsessed,” and don’t think we’re only interested in credit cards and loans. Take a deeper look into our spending and saving tendencies—we might just surprise you.
Subscribe via email to our Stevie® and Feedspot award-winning blog and get a fresh post delivered weekly to your inbox. We promise to keep it interesting, but you can easily unsubscribe if we don’t.