Gen Z has entered the financial marketplace, and they’re already shaking it up. This generation watched their parents struggle through the Great Recession, and they have learned from the experience. There’s a different dynamic between Gen Z and credit than that enjoyed by earlier generations.
But this population also has several advantages. They rode into adulthood on a wave of economic expansion. They’ve never known a world that wasn’t continually connected, and they have a much higher degree of comfort with technology than previous generations. This is how Gen Z’s finances are changing the financial world.
They Have More Access to Credit — but Take on Less of It
Gen Z has access to credit and the potential for debt — but that doesn’t mean they take advantage of it. While the majority of this generation is credit active, meaning they have at least one loan account, they manage their finances well. Half of all credit-active Gen Z individuals have a Vantage score of 661 or higher, meaning they’re dealing with their debt more effectively than millennials at the same age.
Of course, millennials came of age right when the recession hit, requiring many Gen X parents to take on massive debt loads merely to survive. Their children watched them struggle under this burden and perhaps declare bankruptcy. Plus, the specter of hefty medical debt has yet to rear its head over much of this population.
They’re More Likely to Take Risks Than Millennials
Millennials grew up in an investing age where the efficient market hypothesis reigned supreme. This theory held that individual investors couldn’t outperform the market by picking a hot if risky stock. It states that it’s impossible to overvalue or undervalue an investment — for novices in the financial world, this meant one investment was as likely to perform well over time as any other.
However, when it comes to Gen Z finances, they aren’t as averse to calculated risk, and those who enter the market often do so with the hopes of a substantial payoff. Therefore, they’re more likely to diversify their portfolios with several high-risk stocks in hopes of a significant reward.
Money Creates a Significant Source of Stress
Even though this generation is less risk-averse than millennials, they nevertheless stress over their bank accounts. More than three in 10 Gen Zers say housing instability and personal debt cause significant tension in their lives. A similar number struggle with fears about not getting enough to eat.
This financial stress influences this generation’s decision-making processes on the career front. Approximately one out of five members of this generation, along with younger millennials, report they may choose not to attend college. They witness the sizeable number of young Americans who report that their degree is irrelevant to their work. They also watched their parents start their lives burdened with student loan debt. If they find an alternate route through a trade school or a tidy job offer out of high school, they’re likely to skip the high price tag of a bachelor’s degree.
They Care More About Benefits Packages
While social scientists cast the millennial generation as caring about work-life balance, Gen Z has a slightly different attitude toward their jobs. They’re not afraid to work hard, but they expect fair compensation for their efforts. Plus, they expect employers to personalize those packages to suit their individual needs.
For example, workers with chronic health conditions might covet the traditional health insurance package. Young parents might prefer flextime or paid family leave. Those looking to build their portfolios could benefit from access to a financial planner. Employers who want to attract talent from this generation should skip the traditional annual review with the attached raise and instead brainstorm with team members to individualize a package that offers genuine benefit to their lives.
Financial Players Have Room in This Market
Gen Z hungers for financial information, and they’re not as terrified of technology as generations past. Because they are cautious about using their available credit, they appreciate alternatives that help them live within their budgets, such as prepaid debit cards and high-yield savings accounts. Nontraditional banks have an opportunity to replace standard models by offering these services to customers.
Financial planners can also find opportunities with this generation. Much of Gen Z is ready to invest — but they lack the requisite know-how. Firms should market directly to this population to find a new client base.
Gen Z Is Changing Credit and Financial Trends
Gen Z finances will continue to shape economic trends and — eventually — lifestyle. Society can benefit from their willingness to embrace new ideas and learn about how to balance enjoyment of life with responsible money strategy.
About the Author
Alyssa Abel is a college and career writer who educates students, parents and professionals on learning and life. Follow her work on her blog, Syllabusy.