Millenials about to be surpassed by Generation Z…
Millenials are currently the largest population segment. They have surpassed the Baby Boomers, according to a 2018 Bloomberg analysis of United Nations data. Yet Generation Z is about to surpass the Millenial generation.
Gen Z’ers have never known a non-digital world. And they have grown up amid events such as the “war on terror” and Global Recession. So, Generation Z is actually remarkably aware financially, according to financial research firm Raddon, a Fiserv company.
As the parents of two Gen Zers (born after 1997), we’d agree about the financial awareness.
Our sophomore in High School recently shared her concerns about the importance of not taking on too much student loan debt for college. Now, we may be financial advisors but don’t think that we’re any different from you. Our kids are more likely to listen to others before they listen to us. So, our daughter isn’t necessarily unique to the Gen Z’ers in your own household.
We’re here to share some important insights about Generation Z. Top tips on how you may be better able to educate and guide them along the way financially.
1. Getting incorrect financial information is a tricky part of a Gen Z’ers life.
Afterall, they’ve had digital access since they were born. So, as a parent it’s important to help guide them to what’s true and what is fake.
2. Not all debt is bad.
Gen Z’ers are debt averse. And we think in part because of the “Great Recession” and as well, from hearing the woes of millennials with skyrocketing student loan debt. But, the risk here is that no debt means no credit rating. Using debt in a smart way—to gain a credit rating, is important. And, it’s especially important when it comes to trying to rent an apartment, buy a car and some of the other basics that come along with growing into adulthood. The key is to pay off your debt or credit card each month as you use it. Then you gain in credit rating and yet you don’t lose dollars toward paying those credit card interest rates.
3. Online ‘everything’ may have a financial cost.
For example, consider online investing. There are robots who take into consideration your risk tolerance, time horizon and goals. And then, with the click of a mouse you’re investing. We think the Gen Z’ers need to consider the depth of knowledge they don’t yet have in order to avoid making poor decisions. A little guidance from financial professionals can go a long way. So, if you’re a parent who utilizes a financial advisor, virtually all advisors should welcome the opportunity to educate. Even an hours worth of education can go a long way. And, simply showing your child the compounding of interest over time is eye opening for them.
4. Education is key.
Albert Einstein said that the compounding of interest is “The greatest mathematical discovery of all time.” And we would agree. Educating Gen Z’ers on this subject is of critical importance. We often share examples of how saving early and regularly can allow you to save less over time yet have more in the long run.