10 Tips For Generation Z To Have A Better Financial Future

Generation Z are now in grade school, college, and just entering the workforce. Born between 1995-2010, Gen Z (also known as Internet Generation, “iGen” or “Post-Millennials”) follow 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.

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 have an interest to go 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 amount of student debt has 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 way early to congratulate them on success. The undertaking of diligent financial planning is key at this early stage of this generation’s lives as they take on increased responsibilities. Studies show, however, they lack confidence in their personal finance 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 own plan, it is a good idea to meet with a financial planner early on to get on the right path for success. Meetings with a planner at major inflection points in their lives– when getting married, expanding their family, buying a home–should occur.

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

2) Savings and Spending

According to 2018 EVERFI report on Gen Z, 90% of those surveyed had transactional bank accounts, that is, checking accounts, but only 60% were personal accounts with the remainder being 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.

Being tech savvy, this 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 to pay. Additionally, you may be living at home initially.

3) Need An Emergency Fund

When saving, you need to put aside at least 6 months of living expenses for emergency funds for those uncertain times when you may experience unforeseen expenses. In a financial literacy test on basic questions, only 14% of Gen Zers were able to answer a question on emergency funds. It is such a basic financial need for all of us, yet many do not have the ability to cover a $400 unexpected cost.

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 industrious at an early age compared to other 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 prefer 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.

Being careful about spending money, Gen Zers want to avoid the trap of becoming impulsive shoppers. They get financial knowledge and advice from their parents and friends. However, they are equally comfortable to learn by digitally accessing data to gain more information, seek better deals and value. This is an experiential generation and they learn by getting things on their own.

5) Spend Within Their Means

Most importantly, they need to spend within their means. That is easier said than done when you have debt from borrowing for college and  other needs. By tracking their spending and budgeting carefully, they can keep their costs under control. Yes, they will read reviews before clicking on their purchases but we want to splurge at times. This generation values experiences over products but exotic vacations can come at a high price.

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 an authorized user through their parents.

They want to use their credit cards to strengthen their FICO credit scores which averaged 665 in the 4Q18.  They appear to lack experience with credit with only 19% of those surveyed feeling that they had a solid grasp about understanding credit. According to those surveyed, 22% reported having a student loan and 4% have an auto loan. Make sure that loans are paid off on time as lateness will hurt your score.

There are many ways to raise your credit scores to better levels. Understanding how your FICO scores are calculated can provide you with insights how to improve your scores. 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 debt of $14,700 on average, largely from student loans. This is in line 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. When you pay only what is required by your credit card company, the remaining balance is charged a high interest rate. Great for the credit card company, not for the borrower. Make sure you automate your payments so you never miss a bill that is due.

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 the Billtrust’s study found only 18% prefer cash for making 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 (eg.Venmo, Zelle or Paypal) or other digital wallets. Early on, Gen Z seemed to lead as users in the mobile payments systems which are practically designed for their nature.

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 half of all payments will be made on major digital wallets. Over half are using these electronic systems, and over 75% are using some digital payment apps in the same timeframe. 

Gen Z users have been raising concerns, however, when it comes to security when using these products. 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

Planning for their savings for retirement early is among the most unique identifying characteristics of Gen Zers, with 35% indicating they will start in their 20s. This compares to 12% of millennials at the same age. That they are aware of the need to set aside savings early is truly good news. However, nearly half of those surveyed by TD Bank in their study 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.

Clearly, 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 either.

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. As long as they have earned income as a minor from sources such as babysitting, lifeguard or being a camp counselor, they may contribute to this account. Parents may add money to this account up to the $6,000 contribution limit in 2019.

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

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 can be used for retirement savings.To be eligible as 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), delaying retirement savings by just five years to age 27 instead of age 22, results, in a retirement account that is about 18% smaller. There is a need for those 22 or even younger to participate in the first place, particularly if government funding for social security is decreased.

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 without having to miss paying bills on time. Some people dive right in and put funds in an account such as technology-driven Robin Hood. They have a smartphone mobile app to invest in stocks, mutual funds and exchange traded funds. They do not charge commissions or have minimum requirements. There are many online brokers that have eliminated or reduced fees and minimums.

As you grow your portfolio, make sure it is diversified. You never want to be too concentrated in one stock as that is too risky. One way to achieve diversification is to buy a low cost index fund. Vanguard has several to choose from although there are many choices. Alternatively, buy an exchange traded fund or ETF.

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 have recommended it to my own kids and others. I use the Virtual Stock Exchange, a simulated game by MarketWatch, a major financial information site for my college students.

They are business majors who often have had no experience in investing. As part of their term project, they play a simulated stock market game. They have $1,000,000 of funds to invest. The students are ranked according to their holdings. Although their stock investments are virtual, it feels very real 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 most best ways to earn above average returns and grow wealth successfully. ADD some posts

Final Words

The Generation Z is unique compared to previous generations. They are tech-savvy digital natives determined to better themselves in their financial lives. The oldest of the generation are already in the workforce, earning income and becoming self-reliant.

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

Among their greatest 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, track spending, opting in to retirement plans at work and investing. As all generations, Gen Zers will be an exciting group to watch!

Thank you for reading! Are you Generation Z and in the workforce? Please share your thoughts with us how you believe you are different from your older colleagues. We would like to hear from you!



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