The Gen-Z Paradox
Generation Z is screwing up their financial future by assuming that their financial future is screwed.
It’s easy to understand why they’re worried.
The unemployment rate is over 14% for young people. The jobs out of college aren’t paying what they expected. They’ve got a lot of student-loan debt, and the credit card balance is growing.
They keep their extra money in savings accounts and rarely even consider investing in the stock market. They live for today because they don’t see a lot of hope in tomorrow.
But the good news is, they’re probably wrong.
Student-loan debt and the rising cost of college both get a lot of publicity, but the headlines don’t tell the full story.
Though down from highs, the college degree that Gen Z is earning is still worth far more than the degree their parents got:
In addition, Gen-Z is recouping the cost twice as fast as their parents were able to:
On the employment front, of course, young people continue to have a difficult time. But there are some signs of life; Employers are looking to increase recent-grad hiring by 8% over last year’s levels, and job prospects improve fairly dramatically as you move through your 20's.
In other words, Gen-Z is being short-sighted in their pessimism. Their degrees are worth something, their costs will be recouped faster than they think, and their employment prospects are improving.
Gen-Z has time to recover, but do they know how?
What’s most concerning about the financial habits of the under-24 crowd isn’t their spending or debt levels (which seem fairly normal for new grads), but the way they are thinking about saving for the future.
“Zs will be wary with their money after seeing their parents lose jobs and their older siblings move back home” —Emily Anatole, trends writer at The Intelligence Group
There is a particularly worrisome combination among young people: A disinterest in investing (just 17% think the stock market is a good way to invest for retirement) and a severe lack of knowledge when it comes to the stock market.
Leadership is emerging slowly.
While most of the Wall Street brass are dismissive of young people as a potential market, there are some signs of leadership. TD Ameritrade U has had success in bringing investing know-how straight into college classrooms, battling 100's of credit-card offers for Gen-Z mind share.
“While it’s promising to see that Gen Z is starting off with a good understanding of the importance of investing and saving, there is a tremendous opportunity to help educate them on all of the available options” — Nicole Sherrod, TD Ameritrade
So far though, it is startup companies who are seeing the Gen-Z less as a problem and more as an untapped opportunity. Acorns, for example, is a new app that automatically invests your spare change into the stock market. Our company, LikeFolio, allows people to see and learn more about the publicly-traded companies behind the brands and products that are being discussing most on Twitter.
But that’s not enough. Financial literacy is going to take a full-on educational effort from parents, financial professionals, and most importantly, the young people of Gen-Z themselves.
So cheer up, young people… start investing in your future. Things aren’t nearly as bad as you think they are.
Gen-Z just needs to wake up before their flawed pessimism turns into a long-term financial reality.