“[Y]ou’re also the most tech-savvy, adaptable, and values-driven generation to date. And that’s your superpower in this new financial landscape.” —Paul White, “Financial Freedom for Gen Z”
Zoomers adapt! Generation Z, born 1997-2012, grew up fearing the 2008 failure of centralized financial institutions and the insecurity of suffering parents and unemployed graduates with debilitating loans; so they picked cheaper colleges and budgeted cautiously to gain average credit scores over 660 with incomes averaging $28K. They innovated independent living when Covid segregated, and cherished uninsured crypto investments and pooled lending (Aave)—decentralized finance (DeFi).
Steady jobs failed to inspire an entrepreneurial generation that understood balance between lifestyle and work, money and experiences—values retirees are belatedly discovering. Digital nomads may embrace side hustles like selling NFTs (digital art, music or collectibles) or giving online tutoring in areas like Internet marketing. Stressed with financial insecurity, fearing inflation, Zoomers save early and at admirable rates while tracking expenses carefully on apps as they seek flexibility in work and investments.
Financial Education
Data shows 25% of Zoomers saved before age 18 and 56% ages 18-25 report investments. Most know time is their greatest asset. Thinking of retirement early, most Zoomers aim to retire by age 32—or a more realistic age 60—and their early investments may make this possible. Online robo-advisors like Wealthfront assess risk tolerance and financial goals, offset gains with losses for tax harvesting and rebalance asset mixes. Just 22% use financial advisors like me, a fuddy-duddy Boomer trained on abacuses and great books.
With smart phones and digital wallets on umbilical cords giving instantaneous knowledge and opinion, Zoomers got more financial education in school (38%) than earlier generations, but they mainly listen to family, company websites and social media—mostly YouTube, gamey Zogo, internet browsing, Instagram and TikTok. About 65% use micro-investing apps like Acorns or Stash, which whisk spare change into investments. With automated bill payments, 73% use budgeting apps like Mint or YNAB to spot savings and track spending in real time. Apps like Qapital track savings for cars or emergency funds, and Cleo gives AI advice on spending habits that any of us could use.
Gambling for Independence
When college dropouts (e.g. Steven Jobs, Bill Gates) made millions and outdistanced professionals they hired, a generation that desires financial independence by age 32 and expects retirement before age 60 prefers investments akin to gambling. With a trading site encouraging “gamification,” Robinhood Gold enables margin trading of risky securities and options on credit. FINRA attests: “Six in 10…Gen Z investors…who are frequent gamblers are more likely than non-gamblers to be invested in crypto (70% versus 44%), NFTs (38% versus 17%), and options or derivatives (13% versus 2%). They are more likely to invest on margin (40% versus 11%).”
Zoomer Challenges
“Millennials and Gen Z tend to be more progressive,” writes Paul Allen, “advocating for inclusivity and change in areas like gender equality, climate change, and social justice.” He says: “A staggering 58% of Gen Z investors consider ESG factors when making investment decisions. That’s huge!” Yet ESG investing may adapt, as The Wall Street Journal reports Zoomer rebellion against “leftist religion” in “Why Generation Z embraced Trump.”
Zoomers admit they lack financial education but still feel “very prepared” to manage finances. Limiting crypto to 5% of investments, Paul White advises budgeting 50/20/30: 50% for living expenses, 30% for prioritized experiences and 20% for future dreams like early retirement with passive income. He wisely praises Zoomers who write down manifestos proclaiming things like regular monitoring to achieve “a life of purpose, impact and fulfillment.”
Zoomers may learn, as this Boomer has, that the price of flextime for entrepreneurship is financial uncertainty when most enterprises fail. In other articles, I applauded advanced college degrees, predicted the ultimate demise of cryptocurrency, and suggested that professionals usually beat amateurs in options or stock trading. “[R]esearch has shown that frequent trading is correlated with worse returns” (Bonaparte, 2010).
But Zoomers adapt. Will houses and families limit gambling mentalities? After the fall, Zoomers may master long-term investing principles; budget mindfulness, tech savvy and entrepreneurial creativity will bring unfathomable riches to those who still sing “I did it my way!”
Robert Arne, EA, CFP, MS, of Carpe Diem Financial Life Planning, gives holistic financial advice as his client’s fee-only fiduciary. This Mortgage Loan Originator (NMLS #2565162) serves mostly Santa Cruz Mountain dwellers. These articles must not be read as personal financial, mortgage, tax or investment advice; consult appropriate professionals. Learn more at www.carpediem.financial.
