What Gen Z thinks about finances

Yep, the media is already done talking about millennials it seems like.

That's because their successors, Generation Z, are entering college and the workforce en masse. And with that influx of new grads, businesses and financial institutions are taking note.

Loosely defined as those born between 1995 and 2010, this demographic's oldest cohorts are 22, the youngest just 8.

Known interchangeably as Gen Zers, Centennials, Post-Millennials or the iGeneration, to name a few, they are the single largest generation, and they have different views on the world, including their relationship with money, jobs, personal satisfaction and technology.

Here's a quick rundown on who members of this generation truly are and how their perspectives impact finance at large.

They're already planning for retirement

What?!? How?

Several studies conducted in the last few years - such as this one and this one - have uncovered that even the youngest of consumers and grade school-age students are more forward-looking than many researchers would expect.

About 60 percent of Gen Zers already have a savings account: 40 percent have a checking account, Whitman Insights Strategies found.

Because a portion of this generation is graduating into a bull market, in addition to saving early, they've done what previous generations have always had trouble with: stashing away money earlier in their lives/careers to allow for longer stretches of compounding interest.

Interestingly enough, compared to millennials, Gen Zers are planning to avoid working later in life and intend to rely less on government retirement programs, meaning they're confident their financial savings vehicles will comprise the bulk of the retirement funding.

They're very cognizant of debt

Jason Dorsey, president of the Center for Generational Kinetics, hit the nail on the head when he described the approach Gen Z is taking to debt, particularly student loan debt.

"Generation Z is intentionally choosing to attend a less-expensive college so they can graduate with less debt," said Dorsey. "No or less debt means they can enter the job force with more mobility, allowing them to take a job they really want that may pay less, because a good amount of their salary won't be going to a college fund."

Generation Z will be the largest cohort of spenders.Generation Z will be the largest cohort of spenders.

They're more optimistic about their financial futures

Relative to millennials and baby boomers - the two generations preceding them - Gen Zers are more confident in the future trajectory of the country and their personal finances: 89 percent of Gen Z, in fact, compared to 83 percent and 78 percent for the aforementioned cohorts, respectively.

While one could chalk up this rosy outlook to being young and carefree, the deeper truth could lie in how this generation experienced the major events of the last 20 years or so. For instance, they weren't really old enough to remember the Sept. 11 attacks on the World Trade Center. And although their parents may have dealt with the full effects of the 2008 global recession, Gen Zers might not have been able to fully comprehend the magnitude and depth of the crisis.

So, they are cognizant of these events in a more abstract way but not to the extent that it undermines their adolescent optimism in their futures. And this potentially bodes well for Gen Zers in terms of not allowing previous fears or economic anxieties negate their full involvement in the American economy vis-à-vis homeownership, taking out personal loans, sending (future) children of their own to college and other common hallmarks of consumer behavior.

They're not as tied to specific consumer brands (and opt for cheaper, off-brand purchases)

For all the flak younger people receive for being obsessed with social media and all its reinforced narcissism, Gen Z doesn't actually carry this sentiment over to the checkout counter.

"If a product is too pricey or the website is difficult to navigate, Gen Z tunes out and spends their money elsewhere."

It's not necessarily a flashy brand image or even the hottest trend that motivates Gen Z; often, cost is the primary factor.

In general, Gen Z is less loyal to brands and less likely to reward a company with their business should the first purchase not be up to par with their consumer standards.

"This attitude is creating a major impact on brands, because Gen Z would rather own something without the logo and spend less than pay for the brand," said Dorsey.

They're cashless

In terms of actually purchasing items, a majority of Gen Z use web browsers and apps. And if they need to split a bill, they use Venmo.

Financial theory has taught us that using plastic to pay for things tends to lead to overspending. But this line of thinking doesn't hold up in relation to Gen Z.

That's because they are digital natives and have never been accustomed to carrying cash or credit cards: They've always been savvy with technology.

So, being cashless is second nature to them.

They're innately on the hunt for the best, smartest deal

Younger consumers use technology to their advantage, whether that means using Amazon Prime to secure exclusive discounts, scanning products in-store to identify even better prices via apps or buying only from brands that offer speedy delivery, service and payments options.

When one has grown up their entire lives using smartphones to experience the world around them - digitally and physically - the desire to have more information, more choices and more access is a part of ordinary life. That behavior transfers over to consumer spending.

If a product is too pricey or the website from which to purchase is difficult to navigate, Gen Z tunes out and spends their money elsewhere.

For more info on making finance work for you, contact Landmark Bank.

Back to Blog