While Millenials are currently the largest population segment, having surpassed the Baby Boomers, according to a 2018 Bloomberg analysis of United Nations data, using 2000/2001 as the generational split, Millenials are about to be surpassed by Generation Z.
Gen Zers have never known a non-digital world and have grown up amid events such as the “war on terror” and Global Recession. 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—whose kids are more likely to listen to others before they listen to us, especially our teens. So, our daughter isn’t necessarily unique to the Gen Zers in your own household.
We’re here to share some important insights about Generation Z and how you as their parents, 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 Zers 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. Partly because of the “Great Recession” and as well, from hearing the woes of millennials with skyrocketing student loan debt, many Gen Zers are debt-averse. But, the risk here is that no debt means no debt or credit rating. Using debt in a smart way—to gain a credit rating, is important, especially 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 to paying those credit card interest rates.
3. Online ‘everything’ may have a financial cost. Consider investing for example. 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 Zers 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 where education for solid decision making can occur may be a better choice for long-term financial wellness.
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 Zers on this subject alone is eye opening for them. Examples we often share are how saving early and regularly can allow you to save less over time yet have more in the long run.
US News & World Report 5/3/18 By Maryalene LaPonsie
Lenity Financial, Inc. 2019