How Gen Z May By Shaping the Future of Investing

As father of two young adult Gen Zers, It’s interesting to see their attitudes, and relationships with money, personal finance and investing.  As many parents know your children can be completely different. This can be not only their personalities but also their money beliefs and mentality. 

In this crazy to think about how this group of people has been entertained, educated and raised by the digital revolution. Generation Z (born between 1997-2005) is at the beginning of redefining investment strategies for the modern era. 

Born Into Technology

Unlike the Millennials or Gen Xers, or any previous generation before them, these Gen Z young adults have never known a time without technology. Things like the internet, social media, or the convenience of instant access to data including the global markets are but a tap and swipe away. This unique upbringing has profoundly influenced their attitudes toward money and investing.

In a recent survey by Empower, which gathered insights from 1,000 full-time employed Americans, revealed that 43% of the respondents were from Gen Z. The data gathered provided an interesting peek into the thinking and financial behaviors as well as the strategies that set Gen Z apart from these other generations, like the millennials and Generation Xers before them. 

Early Birds Catch the Investment Worm

I had found it interesting and to my surprise, the data shown many Gen Zers are already focused on their financial futures. I was kinda shocked to read a significant number of these young adults are actively planning for retirement in their mid-20s. Unlike many others in previous generations, they exhibit a remarkable openness to getting started and experimenting with their investment strategies. In generations past, often young people may go years without the forethought to start investing earlier in their career.

With this flexibility, it may be why nearly 73% of Gen Z admit they’re still fine-tuning their approach to investing, with over 40% considering themselves beginners. But, In my opinion, at least they are doing something! They are being active and thinking about the future. 

One of the behaviors I found interesting was is their propensity to continue to “buy the dip,” a tactic 45% more favored by Gen Z than older generations. Rather than panic sell in a decline, and feel they need to get out of the market or an investment.  This data then shows that Gen Z may have a better understanding  that time in the market is advantageous to attempting to time the market. This approach aligns with the wisdom of leveraging their youth to ride out market volatility, seizing opportunities to invest when prices are low and they are young with time on their side. This will allow their investments to compound over time. 

Where Does the Money Come From?

Another important data point On average, Gen Z investors allocate about 10% of their annual income to investments, this translates to around an estimated $5,500 per year. This is great! It makes me happy to hear! I’d still recommend more if they are able. However, I understand that the cost of living is crazy.

Many Gen Z manage to invest their income because they can live rent-free with their parents, while others earn more income to invest through side-hustles and other gig work. 

I did find it interesting, that Gen Z are less likely to invest in traditional 401ks—this may be because fewer opportunities, and employers may not offer a sponsored retirement plan, early in their careers. They’re are more inclined towards setting up their own Roth IRAs This is another example of how this younger generation is savvy and can adapt to the evolving job market.

Keeping a Digital Eye on the Prize

As we discussed earlier, these “kids” (I can say that cuz I’m old) grew up in an era of technology and mobile finance apps that offer commission-free trading whenever and wherever they are. Gen Z investors have embraced technology to manage their finances.  My 21 year old and 24 year old kids have used Vangaurd, and Robinhood mobile apps to begin their investing journey! It’s never been easier to start investing for their future selves. 

Horns Up my young friends. \m/ \m/