10 Tips For Generation Z To Have A Better Financial Future

Generation Z is now in grade school, college, and just entering the workforce. Born between 1995-and 2010, Gen Z (also known as Internet Generation, “iGen” or “Post-Millennials”) follows other generations, each extremely distinct when considering attributes, values, and goals.

This generational group’s views of money and how to tackle their finances will differ from Millennials. Their experiences and tech prowess will inform how they save, spend, handle debt and credit, retirement, and other investments. We have 10 tips for Generation Z to have a better financial future.

What Is Generation Z?

Gen Zers, 61 million people in total, are digital natives from their beginning. They have never known a world without high-speed Internet, smartphones, and social media. They are tech-savvy, always connected, and have shorter attention spans of 8 seconds than even Millennials. They are comfortable clicking on links for keyword spotting and watching YouTube videos.

A few Gen Z statistics from a 2018 study:

  • 95% of Gen Z ages 13-22 years have a smartphone.
  • More than half use their phones at least 5 hours a day, with 26% on more than 10 hours per day.
  • Female users registered higher usage than males.
  • 65% are on their phones after midnight several times a week. I can attest to this usage as our Gen Zer children are doing this as well as my college students.
  • 86% of those surveyed are interested in going to college, with 50% stating that they are not willing to take on more than $10,000 in student debt.
  • 83% identify themselves as conservative on money issues. 

10 Tips For Generation Z To Have A Successful Financial Future:


1. Have A Sound Financial Plan

Gen Zers are aware of the impact that the severe recession and massive student debt have had on the Millennials. Gen Zers aim to be more frugal and avoid debt. They are already considering retirement savings earlier than previous generations.

This generation appears to have good intentions, but it is early to congratulate them on success. Diligent financial planning is critical at this early stage of this generation’s lives as they take on increased responsibilities. Studies show, however, that they lack confidence in their financial management and can use some education.

As they are approaching the early stages of their careers, Gen Zers should have a financial plan to address their short-term and long-term financial goals. While they can design their plan, it is good to meet with a financial planner early on to get on the right path to success. Meetings with a planner at significant inflection points in their lives should occur when getting married, expanding their family, and buying a home.

Savings have to be a priority for maximum financial flexibility. They should allocate some money to an emergency fund, retirement savings, and taxable investment accounts. Track key personal financial ratios to see how you stand and make adjustments.

2) Savings and Spending

According to the 2018 EVERFI report on Gen Z, 90% of those surveyed had transactional bank accounts, including checking accounts, but only 60% were personal accounts. The remainder was joint or custodial accounts with their parents. A majority (59%) checked their account balances during the past year, but only 40% of the respondents used or created a budget.

This tech-savvy generation should track spending at a minimum and set up a budget. It is easier to set up a budget when you are young because you have fewer bills. Additionally, you may be living at home initially.

3) Need An Emergency Fund

When saving, you need to put aside at least six months of living expenses for emergency funds for those uncertain times when you may experience unforeseen expenses. It is such a basic financial need for all of us, yet many cannot cover a $400 unexpected cost. In a financial literacy test on fundamental questions, only 14% of Gen Zers were able to answer a question on emergency funds.

In several studies, this generation indicated that they want to be savers rather than spenders. They receive money from a variety of sources, notably their parents (38%); odd jobs, freelance, and other short-term work (23%); and allowance for chores and other responsibilities (22%). This group is dynamic at an early age compared to different generations, given that the youngest of Gen Z in this study is 13 years old.

4) Avoid Impulsive Shopping

In a 2015 Ernest & Young study, 71% said saving money was a top priority and preferred to do that (57%) rather than spending it immediately. They want information before they make purchases. 68% prefer to read at least three reviews before making an online purchase. Gen Z females will read significantly more reviews than males and use social media such as Instagram.

Gen Zers should avoid becoming impulsive shoppers. While their parents and friends are influential, they access informative data to get more valuable deals. This digital group is an experiential generation, and they learn by getting things on their own.

5) Spend Within Their Means

Spending within your means is a challenge when you have college debt. This generation values experiences over products but exotic vacations can come at a high price. By carefully tracking your spending and budget, you can keep your costs under control.

6) Handle Credit And Debt With Good Habits

Although 37% of Gen Zers report having a credit card, 80% received their cards when they were 18 years or younger, many as authorized users through their parents.

The Gen Zers want to use their credit cards to strengthen their FICO credit scores which averaged 665 in  4Q18. However, they need more experience and an understanding about credit. The survey reported that 22% have a student loan, and 4% have an auto loan. At a minimum, you must pay loans on time as lateness will hurt your score.

There are many ways to raise your credit scores. You should learn what contributes to  FICO scores to improve them—learning what impacts credit reports and scores can be meaningful. Easy errors like closing unwanted credit cards can hurt your credit score.

7) Have A Plan In Place To Use Debt Sparingly

With the oldest Gen Z at 23 years old, 51.5% have non-prime credit scores and are carrying a debt of $14,700 on average, mainly from student loans. These amounts align with Millennials’ average score, but Gen Z has had far less time to demonstrate their financial ability to raise their score given their younger age.

It is not too early to consider paying credit card balances in full, not just paying the minimum on time. The best tip is to learn to pay your credit card balance in full so that the issuer isn’t charging high-interest rates every month. While that is great for the credit card company that earns a high income, it is not for the borrower. Make sure you automate your payments so you never miss a bill.

Gen Zers need good discipline when handling credit and paying off debt. While they have some familiarity with financial resources, they can benefit from increased financial education, which isn’t as forthcoming from schools as they would prefer.

It is too early to tell how they, as a group, are handling their debt but putting good habits in place are effective preventive measures.

8) Preference For Digital Payments Over Traditional Credit Cards

Many Gen Zers (51%) will not apply for a credit card, and Billtrust’s study found that only 18% prefer cash to make payments. Instead, this generation’s digital lifestyle points towards digital wallets being the norm for making payments. 79% of Gen Z reported using peer-to-peer (P2P) platforms (e.g., Venmo, Zelle, or Paypal) or other digital wallets. Early on, Gen Z seemed to lead as users in the mobile payments systems. 

Given their hyper-connectivity nature, it is not a surprise to see high Gen Z usage of digital wallets. Almost 2.1 billion consumers will use mobile wallets in 2020, and with younger users making half of all payments on major digital wallets. Over half use these electronic systems, and over 75% use some digital payment apps in the same timeframe. 

Gen Z users have been raising concerns about product security. Though the providers are making changes, notably requiring stronger authentication codes, many have cited that more has to be done by providers.

9) Saving For Retirement Early

Gen-Zers indicate they plan for retirement saving is among the unique identifying characteristic of this generation, with 35% indicating they will start in their 20s. This trait compares to only 12% of millennials at the same age. They are aware of the need to set aside savings early is excellent news. However, in their study, nearly half of those surveyed by TD Bank indicated that a savings account is the best way to save for retirement. Only 17% believed investing in the stock market was the way to grow their retirement.

Gen Z needs more financial education. As they are not yet fully in the workforce, they do not have readily available access to employer-sponsored 401K retirement plans. A 2018 Pew Survey reported that more than one-third of private-sector workers do not have access to these plans.

There are several ways Gen Zers can save early  for their retirement:


Roth IRA or Traditional IRA

For those not yet working and under 18 years, their parents can open a custodial Roth IRA or traditional IRA account. They may contribute to this account as long as they have earned income as a minor from sources such as babysitting, being a lifeguard, or being a camp counselor. Parents may add money to this account up to the $6,000 contribution limit in 2019.

A Roth IRA is preferable to a traditional IRA with after-tax contributions, offering tax-free growth and tax-free withdrawals. If the minor has not yet generated income, parents can open a custodial taxable investment account in the meantime. This is a great way to have healthy money habits at a young age. Early savings allow compound growth over decades is an excellent way to have a healthy retirement.

Solo 401 K Qualified Plans

Many Gen Zers and Millennials have indicated their greater preference (four in five) for gig work over traditional 9-5 jobs.  If Gen Zers start their own business (49% according to a Monster survey), they can open a solo 401 K qualified retirement account, similar to those offered by companies. This account would be in addition to your IRA, and you can use it for retirement savings. To be eligible for a qualified retirement plan:

  1. there must be evidence of self-employment activity for purposes of generating income in order to cover the self-employed owner and spouse if he/she is working there and
  2. Absence of any other employees.

According to the World Economic Forum (2018), it is delaying retirement savings by just five years to age 27 instead of age 22, resulting in a retirement account about 18% smaller. There is a need for those 22 or even younger to participate in the first place, notably if government decreases funding for social security.

10) Embrace Investing

To ensure a financially secure future, you need to save more than spend, have an emergency fund for unexpected costs, avoid debt and have a strong credit score for maximum flexibility. You should save for retirement and invest in assets, allocating risk according to your age and preferences.

Start by investing small amounts you can afford. Some people dive right in and put funds in an account like Robinhood. They have a mobile app to invest in stocks, mutual funds, cryptocurrencies,  and exchange-traded funds. They don’t charge commissions or have minimum requirements. 

Maintain and grow a diversified portfolio. Avoid concentration on one stock, which is too risky. One way to achieve diversification is to buy a low-cost index fund from Vanguard or another mutual fund company.

Stock Market Game Provides Great Lessons

For those who want a bit more comfort before investing, try finding a simulated stock market game that you can play with friends or family. I use the Virtual Stock Exchange, a simulated game by MarketWatch, a significant financial information site for my college students. I have recommended it to my kids and others.

They are business majors who often have had no experience in investing. They play a simulated stock market game as part of their term project. They have $1,000,000 of funds to invest, and they monitor their ranking. Although their stock investments are virtual, it feels authentic to them whether they have gains or losses. We look at factors that impact the financial markets, risks, and diversification.

Learning how to invest early provides you with a long-term horizon, benefiting from the power of compound growth. Stock investing is one of the best ways to earn above-average returns and grow wealth successfully. 

Final Thoughts

Generation Z is unique compared to previous generations. They are tech-savvy digital natives determined to have better financial lives. 

As a group, they have had less time to demonstrate financial behavior, but early signs of how they treat money are favorable. That is not to say they couldn’t benefit from more financial education, as we all can. Many say they wish they had studied financial literacy in high school. They learn differently than those of us who were called digital immigrants, coined by Marc Prensky.

As such, Gen Zers may have some challenges to overcome. Learning how to develop financial habits takes time and attention beyond their short attention span and tendencies to devour information quickly.

Like all generations, Gen Zers will be an exciting group to watch! Among their most significant assets to date is their ability to use digital technologies to resolve problems. Such uses include having automated payments so as not to miss a bill, staying on top of their credit reports, using more apps for budgeting, tracking spending, opting into retirement plans at work, and investing.


Thank you for reading, and find more articles on The Cents of Money

Are you a Generation Z-er and in the workforce? We would like to hear from you! Please share your thoughts about how you believe you are different from your older colleagues.


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