Money and Generation Z

A “Millennial” is a person who reached young adulthood around the year 2000. Generation Z (also known as Post-Millennials) is the generation following the Millennials. The oldest members are somewhere between 18 to 22 years old.

The Gen Z attitudes about money were impacted by hardships of their parents during the 2008 recession, along with the boom market that we’ve experienced during the past 6 years.

The financial research firm Raddon analyzed data from 2,500 teens between ages 16 and 18 for a report issued last year. They found: “Generation Z is actually remarkably aware financially, more than we expected them to be.” Two-thirds of them already have a financial account. And according to the report, teens were three times more likely to have taken a financial education class or seminar as compared to millennials.

The financial education and awareness is a real positive for Gen Z. They are also quite tech savvy. Since they have never known life without the internet they turn to the internet for advice on everything, which could help or hurt them. Technology can be a helpful learning tool.  Apps like Robinhood, STASH or ACORNS make it easy to save, invest and learn.

But, anybody who has used the internet knows that it’s both good and bad. Financial problems can’t always be solved by an online search, and incorrect financial information could be a click away. It’s simple for teens and young adults to find information about saving, spending and investing.  But it’s not so easy to figure out which advice to follow and which to ignore. A financial neophyte can be easily led in the wrong direction based on poor online advice.

Fortunately, many teens turn to their parents for financial advice which is good, as long as mom and dad have a reliable financial grasp of the essentials. Sirach 3:1-2 offers fatherly advice: “Children, listen to me, your father; act accordingly, that you may be safe. For the Lord sets a father in honor over his children and confirms a mother’s authority over her sons.”

While Generation Z is the most tech-savvy, they may not always understand the consumer protection differences between financial technology companies and banks. FDIC insurance protection covers deposits in banks. That means each depositor can be reimbursed up to $250,000 should the bank fail. However, the balance held in an online payment service doesn’t get that same protection. Online services don’t operate under the same regulations as banks and don’t have the same consumer protections.

Many Gen Z’s will use their debit card on a regular basis without understanding the difference between credit cards and debit cards. If lost or stolen, credit cards are more secure as the maximum loss is $50. The maximum loss on a lost or stolen debit card can be as high as $500. With a debit card, the money comes out of the account when the transaction takes place. If there is not enough money in the account, many banks offer overdraft protection for a $35 fee. Buying a $6.00 fast food meal with an overdraft fee attached to it, means spending $41 on fast food. 

Generation Z seems to have become debt-averse, which is great but sooner or later they’ll need to establish a credit history and the only way to do that is to take out a loan or use a credit card. As this generation matures, they may find it beneficial to focus on the smart use of debt rather than avoiding it altogether. A mortgage is almost always a necessity for those wishing to buy a house, and those without any credit history may find it difficult to qualify for favorable loan terms.

Generation Z operates in a digital world, and most financial companies haven’t progressed to being all digital. Generation Z needs to be mindful of making poor decisions because they lack in-depth knowledge and have chosen digital investment strategies, rather than working with experienced financial professionals. Financial professionals may help them avoid making a money mistake that can have long lasting impacts.

In the past, keeping up with the Joneses meant a big house, a fancy car and all the material goods you could possibly desire. The trend nowadays focuses on experiences. Today’s young adults see the world through social media. In their quest for new/better experiences they could spend more than they realize, thus creating debt. Whether it’s for experiences or stuff, debt is still debt.

Gen Z seems more interested in part-time work, gigs and being entrepreneurs rather than full-time traditional employment, which is not bad – it’s just different. Teens who follow online celebrities via YouTube, Instagram and Snapchat may think celebrity and fame are at their fingertips. There is an assumption that if you carve out a personal brand there is a way to monetize it. Obviously, that can’t happen for everyone and there is a need to fill many less glamorous traditional jobs that still pay good money and are necessary in our society.

In this fast-paced, digital, online world, Gen Z may find it hard to slow down when facing major financial decisions such as a job change, investing or home purchase. At these times, it is very helpful to go to a quiet place where they can spend uninterrupted time prayer, reading the Bible, and seeking the Lord’s direction. In this care, old-fashioned is better!

Join us on the Compass Catholic podcast for more about Money and Generation Z.

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