Gen Z & the Financial Revolution: Navigating Funflation, Job Flexibility, and Digital-First Mindset
Exploring how Gen Z’s unique financial habits are reshaping personal finance services
With their changing attitudes towards work, ownership, and investment, Gen Z is emerging as a key challenger to the status quo in personal finance. Grappling with new financial challenges at a time of high inflation, expensive college costs, and a competitive job market, they demand new financial products and services that cater to their unique needs.
In this article, we will explore three major trends about how Gen Z is re-shaping the personal finance landscape, and how financial service brands can best respond to them.
The Paradoxical Impact of “Funflation”
Gen Z, who came of age with the internet and then during lockdown, are eager to get out and explore. Along with Millennials, they drove a summer of “funflation” this year with massively increased spending on travel and out-of-home entertainment, despite the rising cost-of-living. The paradoxical challenge for financial service brands, therefore, lies in addressing their heightened need for offline fun with rewards while encouraging frugality and savings to fend off rising inflations.
According to a StubHub survey, Gen Zers are 2.5 times more likely to buy a themed concert outfit than GenX, indicating their desire to express themselves and enjoy memorable experiences. Moreover, 35% of Gen Zers say they are willing to go into debt to afford entertainment, per a recent Qualtrics survey. This suggests that they prioritize immediate gratification over long-term financial security. However, this attitude may come at a high price, as a recent UK study found that Gen Z may be left permanently psychologically scarred by high inflation.
The rise of “funflation” among Gen Z consumers poses a unique challenge to financial service brands. While this generation’s desire for memorable experiences and self-expression is understandable, it is crucial to address the long-term implications of their spending habits. Financial brands can play a pivotal role in helping Gen Z balance their enjoyment of life with prudent financial management.
This approach not only supports Gen Z’s current lifestyle but also prepares them for a more secure financial future. One possible tactic is to offer rewards programs that incentivize them to save while giving them access to exclusive experiences. Another option is to provide financial education and guidance that helps them understand the impact of inflation and how to budget accordingly.
Flexible Incomes Demand Flexible Management
A significant portion of Gen Z is turning away from conventional 9-to-5 jobs, instead embracing what is often termed as ‘polywork’ — engaging in multiple jobs or projects simultaneously. In fact, 46% of Gen Z say they work more than one full-time job, a recent Paychex survey found. With a significant part of Gen Zers skewing conventional career paths in favor of becoming content creators and solo-preneurs, their embrace of the creator economy spells new opportunities for financial service brands to speak to their needs.
A survey by ZenBusiness found that 84% of Gen Zers rank “creator” as the most accessible or feasible career, with entrepreneurs coming in second at 75%. The study also suggested that Gen Z might be more inclined to starting businesses because they see the world differently; 82% of Gen Z surveyed believe that such folks are better suited for entrepreneurship than a traditional career. This inclination towards creative and felxible work is redefining what a career looks like for the youngest working generation, which is set to overtake baby boomersin the full-time work force in the U.S. next year.
As a result of their changing views on careers and employment, Gen Z faces more uncertainty and complexity in managing their finances than older generations. For example, they may have multiple income streams from different platforms, irregular cash flows, variable expenses, and tax obligations. That’s why Gen Zers are looking for financial solutions that can help them manage their money more easily and efficiently. Thus, the best way for brands to address their need for more flexible financial management is through products like BNPL (buy now pay later) and AI-powered tools.
BNPL is a popular option among Gen Z consumers, who use it mostly for practical, smaller purchases, such as clothing (39%), groceries, and restaurant orders, according to a PYMNTS report. BNPL allows them to split their payments into smaller installments, without interest or fees, and to avoid credit card debt. Mobile banking is another way for Gen Zers to access their finances anytime, anywhere, and to track their spending and saving habits. Additionally, AI-powered tools like Albert or Cleo can help users automate their savings, optimize their investments, and get personalized insights.
Adapting To Gen Z’s Digital-Native Mindset
As the first generation to grow up in a fully digital world, Gen Zers are not only accustomed to having everything at their fingertips, they are also savvy and discerning consumers who value experiences over possessions, quality over quantity, and social impact over personal gain. This digital-native mindset has profound implications for how Gen Z approaches money, luxury, and investments. 3 in 4 of Gen Z would rather have a better quality of life than have extra money in their banks, a report by Intuit shows.
Unlike previous generations, for whom physical possessions often symbolized status and success, Gen Z tends to place more value on digital assets and experiences. A survey by Obsess found that 74% of Gen Z consumers have purchased digital items within an online video game, illustrating their comfort and familiarity with owning intangible assets. These purchases are not just for fun, but also for self-expression, social status, and community building. For Gen Z, digital goods are as valuable and meaningful as physical ones.
This digital-native generation’s affinity for digital goods extends beyond gaming into broader aspects of their lives, including how they perceive and interact with financial products and services. This shift requires financial brands to rethink their traditional approaches, considering digital-first strategies and products that resonate with Gen Z’s preferences.
But this affirnity for digital goods doesn’t mean Gen Z is not interested in traditional luxury goods. In fact, a Bain & Co. report found that Gen Z consumers are starting to buy luxury goods at age 15, three to five years earlier than millennials did, often as a long-term investment. As savvy consumers who grew up with online resale platforms like ThreadUp and the RealReal, they are keenly aware of the enduring resale values of premium luxury goods.
This tendency to start investing early also extends beyond luxury goods. Gen Z is not waiting until they have a stable income or a large amount of savings to start investing. They are taking advantage of the accessibility and affordability of online platforms and apps that allow them to invest with small amounts of money. A study by the FINRA Foundation reveals that Gen Z is beginning to invest younger than any generation before them. They are also more diverse and inclusive in their investment choices, favoring companies that have a positive social and environmental impact.
Of course, we’d remiss not to mention one of the hottest digital investment assets that the younger generations have embraced. The rise and volatility of the cryptocurrency and NFTs market in the past few years have had a notable impact on Gen Z. This generation has witnessed the boom-and-bust cycles of the crypto economy, which has shaped their views on investment risks and opportunities. Among credit union members, nearly half of the Generation Z respondents has sold off their cryptocurrency assets in the past 12 months, with 22% currently holding digital assets out of 44% that had crypto assets in the past 12 months. Yet, they still hold higher amount of crypto assets than older generations.
This presents both opportunities and challenges for financial brands. On one hand, there is a clear interest in innovative investment products; on the other, there is a need to provide education and guidance to help Gen Z navigate these new and often complex markets safely.
Altogether, these trends show that Gen Z is not only a powerful consumer group, but also a catalyst for change in the financial sector. They are challenging the status quo and demanding new solutions that cater to their needs and aspirations. Financial brands that want to win over this generation need to adapt to their experience-driven spending habits, their demand for flexible financial management, and their digital-native view of ownership and investment.
