The future of Gen Z and money

They’re young. They’re hip. They’re tech-savvy. And they’re ready to take on the world.

Meet Gen Z, the digital natives born to the era of social media. This generation is currently reshaping the banking sector as we know it.

Socially aware and entrepreneurial in nature, Gen Z already have a $143 billion spending power in the US alone, according to Business Insider Intelligence. This capacity will only increase in the next decade as baby boomers will exit the workforce, millennials will turn 40, and we will witness the rise of the young Gen Zers.

But, Gen Z seem to be peering into an uncertain future. This is because the upper half of this large generation — those currently aged 18 to 23 years old — were entering into a strong economy with record-low unemployment, up until the end of 2019, when the arrival of the COVID-19 reshaped the world’s social and economic landscape.

Indeed, each demographic part of the Gen Zers has experienced the repercussions of the novel coronavirus in their own way.

The youngest in the generation have experienced months without live schooling, seeing friends and working part-time jobs. Gen Zers completing high school saw standard tests go by the board and watched rites of passage like graduation and proms get cancelled or morphed into remote occasions. Also, summer jobs are sparse, while fall plans are a big question mark.

What’s more, uncertainty looms for Gen Zers entering universities and those entering the workforce. The latter have often been the first let go or furloughed.

What makes this sudden change in their lifestyle all the more dramatic is that Gen Z had, and has been, shaping up as a generation that takes early responsibility for its financial affairs seriously- for real. Despite all the turmoil, they still seem to have clear financial goals that are usually associated with later life stages. For instance, in its annual report, the Center for Generational Kinetics focuses on “The State of Gen Z” in the US and indicates that:

• 91% hope to buy their own house someday,
• 69% think retirement savings should be a personal priority,
• 66% worry about not being able to pay off school loans — or how to avoid the debt in the first place.

The money habits of millennials have widely been studied. Having come of age and entered the job market during the Great Recession (2007–2009), they are often considered to be more cautious and intentional with their money. Millennials prioritise saving for the future, avoiding debt, and spending on life experiences over material possessions. They also tend to be more comfortable than older generations in using technology to manage their finances.

Gen Z, now nearing and entering their early 20s, are forming their own set of priorities and characteristics, in some cases different from those of their millennial counterparts.

Here’s what appears so far to be the most important money priorities for Gen Z, as well as the resulting trends that the financial services industry should consider as it evolves to meet the demands of this up-and-coming generation:

Savings

Despite their young age, Gen Zers are financially literate and have a touch of frugality in them. Not only do most of them work to earn their allowance (or salary) but they are also familiar with the mobile banking apps that allow them to open an account and start a saving plan. Indeed, many of them have already set early retirement plans, with post-retirement aspirations such as learning a new skill or opening up a restaurant.

Investing

If there’s one thing Gen Zers value, it’s entrepreneurship. They know that investing is an act that pays off in the future, which is why a lot of them invest in stocks and startups as well. In fact, CNBC called them “Gen DIY” because many of them taught themselves how to invest successfully via online tools. “Why would I go to someone for financial advice when I can find what I need online?” one Gen Z investor asked CNBC. Also, according to the Center for Generational Kinetics, Gen Z are a generation eager to invest but averse to risk.

Digital banking

Gen Z may actually be the first cashless generation due to their enthusiastic adoption of mobile wallets. While the adoption of mobile wallets and digital payment apps has been slow among older users, Gen Z is all in for the experience. Research from Finance Monthly shows that during an average month, almost half of them use a digital wallet , and over three-quarters use other digital payment apps or P2P apps. Personally, we know from our experience just how excited Arab Gen Zers are in adopting mobile banking apps!