The money habits of Millennials have been cited endlessly over the past few years. They’re saving for retirement. They have loads of student debt. They are making trade-offs between high rent urban centers and less expensive real estate.
Ok, that’s them, the folks in their late twenties and thirties. But they aren’t the youngest working and money-earning generation any more. Enter Generation Z.
Generation Z was born in 1996 and later. In other words, the oldest is now 21. They are at their first (or maybe second or third) job. They may have graduated college. They are earning and spending money as adults, at least the first wave of them.
Do their money habits differ from Millennials? Yes. Here are the most significant differences.
Generation Z is not footloose and fancy free when it comes to money. They are very aware of money and its value. More than 20 percent of them have had a savings account since the age of 10. While the percentage of older Americans with a savings account just cracks 50 percent, 64 percent of Generation Z have one.
Some of this could be their parents drilling them about the need to save for college and retirement. But also, they grew up in a time of uncertainty. They were small children or infants when 9/11 occurred, for example. They were children when the Great Recession of 2008-2009 happened. They may have witnessed parents or older brothers and sisters look fruitlessly for work and fall behind on mortgages and bills. They’re very aware of the need to have savings as a life event cushion.
They’re Not Comfortable With Debt
Just as Generation Z members are savers, the flip side of the coin is: they are not comfortable incurring debt. Twenty percent want to avoid debt entirely.
They are also very wary of student debt. The generation directly before them has incurred record levels of debt to fund their education. Generation Z has seen the effects. Student debt loads can affect the ability of young adults to save for the markers of adulthood, like a house or starting a family, or even a car.
As a result, they have plans to fund their college educations that do not include getting loans. Twenty-four percent plan to use their savings for college. Thirty-eight percent plan to have a job as they attend college.
They Like Steady Employment
Millennials liked the thought of starting their own business. The entrepreneur, or at least the idea of being an entrepreneur, was king. Generation Z is very different. They’ve seen the potential drawbacks of start-up businesses. Many of those fail. The start-up founder is responsible for everything. If you simply are hired by a business, you get a salary and stability.
Generation Z likes that steadiness. They would rather work for a corporation: 36 percent want to work for a company.
The emphasis on stability has led prognosticators to label Generation Z the “throwback generation.” They are more focused on getting qualifications such as internships early and then working.
They Are Already Planning for Retirement
Generation Z is already planning how they will fund their retirement. Not only are 12 percent already saving for the golden years, 33 percent have specific plans to start retirement saving in their twenties. Thirty-four percent plan to work during retirement.
Here, too, Generation Z may have learned from the example of older generations, including not only Millennials but their Generation Y parents and their Baby Boomer grandparents. Social Security is still a safety net, but it has not kept pace with the rising cost of living. Generation Z is very aware that government funds will not cover their retirement completely.
Their Financial Life Is Digital
Millennials are often termed digital natives. In other words, many of them have never known any other method than digital to shop or bank. But it’s arguable that Generation Z are the true, dyed-in-the-wool digital natives. After all, some Millennials were born in the 1980s, a comparative dark age when many people had dial-up.
But in Generation Z’s lifetime, the smartphone and wireless access have become customary. They have become the way of retail shopping, for many people. Mobile phones have increasingly become the way that payments are made and checks deposited in bank accounts. Many Generation Z-ers can’t remember a time before smartphones. And they certainly can’t remember a time before Amazon.com, which was founded at the beginning of their generation. So retail shopping online is the norm, to them.
Generation Z follows suit. Half use mobile apps for their banking. Many shop online.
Does Generation Z differ from their predecessors, the Millennials? Yes. They are more likely to save and less comfortable with debt. They actively seek a corporate life, not an entrepreneurial dream. They are already financing their retirement. They are digital natives in terms of their financial life. Welcome, Generation Z!