Are the generation Z as frivolous with their money as we perceive them to be?
Generation Z, commonly known as the ‘zoomers’, is the demographic cohort that follows the ‘millennials’ (anyone born between 1981 and 1996) and precedes the generation ‘alpha’ (individuals born between 2010 and 2025). They are known as “the most woke and progressive generation” yet, and they are concerned about representation, equality, sustainability, and mental health — and they want the companies and brands they support to be concerned as well. The fascination in all things vintage among Gen Z originates from their desire to live more sustainably, which explains the rise in thrift shopping on sites and the promotion of locally owned small companies to combat fast-fashion consumption.
What’s so different?
Millennials and boomers were both born in relatively peaceful and prosperous times, as compared to the past decade and didn’t have to deal with economic downturns and their implications until they were well into their teens. It’s no surprise that, in comparison to previous generations, Generation Z has a reputation for frugality and a tendency to save (Desjardins, 2018). When it comes to saving and investing, Gen Z comes out on top, with a higher percentage of them starting to save at a young age, sticking to a budget, and knowing more about investing and making investments. According to a survey, 75% of Gen Z investors said they began investing before 21. In contrast, only 26% of millennials started investing before age 21. In fact, the largest majority of millennials (28%) started investing between 21 and 24, while 21% waited until they were 30 or older (Evans, 2021). Because they are less likely to take on debt, Gen Zers have superior credit scores and are less likely to have trouble paying it off (Anagnos, 2020). Apart from the unique mix of circumstances under which Gen Z is entering maturity, they are on course to be the most educated generation in history. Among 18- to 21-year-olds no longer in high school in 2018, 57% were enrolled in a two-year or four-year college. This compares with 52% among Millennials in 2003 and 43% among members of Gen X in 1987. They’re also digital natives, with little or no recollection of the world before smartphones (Parker, 2020).
Financial needs of Generation Z
Swiping on a screen is natural to them, and they feel at ease making all of their decisions on a gadget. Financial firms are adopting a more digitized strategy as a result of this, which is changing the way financial transactions are handled. They’d like to know their credit limit, interest rate, penalty fees, and when their next payment is due. A corporation that is actually capable of doing so will win. Saving money is more important to Gen Zers than it was to Millennials when they were their age. In fact, “Generation Savvy” saves $387 each month on average from earnings, discounts, and smart purchase decisions, such as buying used (Sadlier, 2020). Millennials are more concerned with the full experience of purchasing a product, whereas Generation Z is more concerned with purchases that maximize the value of every dollar spent.
Changing the Concept of Credit
Credit is perhaps the most significant way that Gen Z’s economic views influence economic decisions. The popularity of buy now, pay later services among younger buyers is partly to blame for their rapid expansion. Gen Z appreciates the benefits of buy now, pay later, which include zero-interest loans on select products, almost no credit checks, and forgiving payback plans. As a result, we’re already witnessing the credit industry’s nature shift. Building credit is always the safest technique to begin a financial profile that doesn’t involve a large initial expenditure. Gen Zers demonstrate that they are aware of this reality by opting for credit cards over college loans. Because of their high levels of student loan debt, millennials are less able to seek out the same types of loans with low interest rates. Credit scores may become less important in the future as Gen Z considers purchasing homes, cars, and other large purchases.
Investments and Sticking with the Basics
While Gen Z is skeptical of Wall Street, they are also aware that the stock market is the most powerful wealth generator in history. (Lisa, 2021) Despite the widespread belief that Gen Z prefers innovative assets such as meme stocks, crypto, and SPACs over traditional securities, their investments are surprisingly mainstream. According to a survey from Motley Fool in 2021, 73 percent of Gen Zers invest in stocks — a Bloomberg poll put the figure at a nearly identical 75 percent — which is considerably higher than the percentage of Gen Zers who bet on riskier, rising trends like crypto and meme stocks (Lisa, 2021). Not only does Gen Z adhere to the fundamentals sensibly, but they’re also shockingly cautious and careful when it comes to investing. According to a survey, 33% of Gen Z and Millennial investors participate in at least one online investment community or forum, with 23% participating in numerous. Gen Z Planet, a research and advising firm, recently discovered that the generation is saving and investing more than it is consuming, with $360 billion in disposable income. (Pollard, 2021)
They are Shrewd Consumers
Gen Z’s consumer behavior reflects their values — as well as the influence of an increasingly digital world. To make informed purchasing decisions, Gen Z youth can rely on their tech expertise and extensive social networks. Their pragmatic approach causes them to consider and evaluate a variety of choices before settling on a product. Furthermore, they are more likely to be affected by real-life user recommendations than celebrity endorsements. One of the most effective ways for marketers to reach out to Gen Z consumers is through social media. As a result, over half of Gen Z customers (44%) have made a purchase decision based on an influencer’s advice, making Gen Z an excellent demographic for influencer marketing (Lekkas, 2020). According to a Fortune article, clothing company Zara became one of the most successful examples of influencer marketing in retail, garnering $2.3 billion in yearly revenues in 2015. This is largely due to the brand’s decision to engage influencers to boost its social media marketing. They chose to collaborate with well-known fashion-focused Instagram accounts (Barker, 2020). In the same way that Gen Zers use social media to design their own personal brand, they consider their purchasing decisions to be an expression of their values and identities. They are drawn to sustainable products and companies, for example, and are often willing to pay extra for them. They value more personalized products being drawn to brands who share their point of view on political issues.
A look into Gen Zers’ future
Generation Z (Gen Z) will be the “most disruptive generation ever,” according to Bank of America, with income topping that of millennials by 2031. The “OK Zoomer” analysis from Bank of America Research found that Gen Z will do well in the long run (McKeever, 2020). According to the report, the generation presently earns $7 trillion among its 2.5 billion members. By 2025, that income will have increased to $17 trillion, and by 2030, it will have increased to $33 trillion, accounting for 27% of global income and exceeding that of millennials the following year. With their forward-thinking solutions and apps, fintechs are well positioned to entice the younger generation. Gen Z is all about digital banking solutions, a market with minimal entry barriers where new companies appear with a variety of incentives and top-notch user experiences. This generation is concerned about its future and has certain financial goals in mind for later in life. Hence, one could say, they are well prepared for their future.
Manya Jha is a first-year student of Economics at Indraprastha College for Women.
REFERENCES
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