Gen Z & Money: Establishing A New Generation of Financial Habits

Generation Z’s Unique Financial World

The financial world that Generation Z is inheriting differs starkly from that of previous generations. Born between the late 1990s and early 2010s, Gen Z has grown up witnessing the fallout from the 2008 financial crisis and now faces the economic uncertainty stemming from the COVID-19 pandemic. Combined with mounting student loan debt, a shifting job market, and the rapid digitalization of banking, this generation faces unique financial challenges.

According to the Federal Reserve, in the third quarter of 2020, Americans owed over $1.7 trillion in student loans—a figure that disproportionately affects Gen Z as they prepare to enter the workforce. Unlike previous generations, who could afford to buy homes and save for retirement earlier, many young adults today are grappling with the reality of high student loan debt and the gig economy, which often lacks the security of traditional full-time employment.

Moreover, Gen Z’s relationship with technology deeply influences their approach to money management. A survey by Morning Consult found that 87% of Gen Z individuals now use banking apps regularly. With digital banking, investing, and payment methods becoming the norm, this generation has easier access to managing their finances, though the rapid pace of technology can sometimes complicate things.

On a positive note, this generation is also proving to be surprisingly pragmatic when it comes to money. A Bank of America survey showed that Gen Zers are more likely to start saving for retirement early, with 1 in 5 between the ages of 18 and 24 already contributing to a 401(k). They also tend to save more of their income compared to Millennials at the same age.

Given the unpredictable economic environment and evolving workforce dynamics, retirement planning can seem like a distant goal. But if you are a “Gen Z-er” and have read this far, by understanding how your financial challenges differ from those of previous generations, you can leverage opportunities unique to you, and get on the path to building a strong financial future.

With that in mind, let’s first explore how Gen Z’s financial habits compare to those of other generations and offer practical strategies for navigating the modern financial landscape.

Across Generations: Comparing Financial Priorities

Socio-economic conditions shape each generation’s financial priorities, and Gen Z’s priorities are distinctly different. Baby Boomers (born between 1946 and 1964) prioritized job stability and homeownership, often encouraged by the post-war economic boom. Generation X (1965-1980) faced economic downturns, which shaped their cautious approach to saving and retirement. Millennials (1981-1996) navigated the Great Recession and the student debt crisis, making them more inclined to delay major life milestones like homeownership and starting families.

Four distinct factors determine Gen Z’s financial priorities:

1. Education Costs and Student Debt:

Gen Z is highly aware of the burden of student debt. With nearly $1.7 trillion in outstanding student loans in the United States as of 2020 (Federal Reserve), many of them are actively looking for alternatives to traditional education paths. For instance, a study by Bankrate found that 39% of Gen Zers are considering skipping a four-year college entirely to avoid high tuition costs.

      2. Flexible Career Paths:

The gig economy is redefining how Gen Z views career stability. According to a 2021 survey by the Pew Research Center, roughly 16% of Americans have earned income through gig work, and Gen Z is embracing freelancing more than any other generation. This pursuit of flexible work allows them to follow passion projects and balance multiple income streams, but it often comes at the expense of employer-sponsored benefits like retirement plans and health insurance.

     3. Financial Independence:

Despite the challenges, Gen Z places a high value on financial independence. An Investopedia survey found that 57% of Gen Z respondents want to start saving for retirement by age 25. While saving for retirement is a priority, their approach may differ due to the prevalence of digital investment tools, with 60% favoring financial apps for budgeting and investing.

     4. Value-Driven Spending:

Gen Z is increasingly making value-based purchasing decisions. A study by First Insight reported that 62% of Gen Zers prefer buying from sustainable brands and are willing to pay more for eco-friendly products. This generation is reshaping consumer expectations, impacting how businesses market to them and how they allocate their own spending.

These trends show that Gen Z is recalibrating financial priorities to suit their rapidly changing environment. From avoiding unnecessary debt to pursuing value-driven purchases, their evolving financial mindset contrasts sharply with the traditional paths taken by older generations. The unique blend of pragmatism and technological savvy has led Gen Z to redefine success and security in their own terms.

How Technology Affects Money Management

Gen Z has never known a world without the internet, smartphones, and digital payment options. This digital-first upbringing has greatly influenced how they handle their finances. For previous generations, managing money involved physically visiting banks and using checkbooks. In contrast, Gen Z’s reliance on financial apps and online banking makes traditional banking methods feel almost obsolete.

Digital Banking and Payment Methods:

A survey by Deloitte found that 48% of Gen Z consumers prioritize digital payment methods and banking apps, compared to 30% of Baby Boomers. Services like Venmo, PayPal, and Zelle have become commonplace, allowing Gen Z to transfer money instantly. Online banks like Chime or Ally have also gained popularity, offering features like early direct deposit and lower fees.

Investment and Budgeting Apps:

Investment apps like Robinhood and Acorns have made investing accessible to Gen Z. Robinhood saw a user increase of over 3 million new accounts in 2020 alone, many of them belonging to young adults just beginning their investment journeys (Source: Robinhood). Acorns’ micro-investing platform, which rounds up spare change from purchases and invests it, appeals to Gen Z’s affinity for convenient, automated financial tools.

Budgeting apps like Mint and You Need a Budget (YNAB) offer young users insights into their spending habits, helping them control their finances without the complexities of traditional spreadsheets.

Cryptocurrency:

Gen Z is also embracing cryptocurrencies more than older generations. A survey by Charles Schwab revealed that 16% of Gen Z respondents have already invested in cryptocurrency, compared to just 8% of Baby Boomers. The allure of decentralized finance and a distrust of traditional banking institutions have pushed Gen Z toward crypto as an alternative investment opportunity.

Social Media Influence:

Social media platforms like TikTok and Instagram have given rise to “Finfluencers”—social media personalities who share financial tips with their audience. This phenomenon has democratized access to personal finance education but has also created a potential pitfall, with some advice lacking nuance or promoting risky investments.

Potential Downsides:

While digital tools offer convenience, they can also lead to overspending and financial insecurity. According to a survey by the National Endowment for Financial Education (NEFE), 68% of Gen Z individuals admit to making impulsive online purchases. The ease of digital transactions can make tracking finances challenging.

Overall, technology offers Gen Z more options and flexibility in managing their money, but it requires a solid understanding of responsible spending and saving habits. By leveraging the right tools while avoiding the potential pitfalls, Gen Z can harness technology to their financial advantage.

Financial Challenges Unique to Gen Z

Student Loan Debt:
Gen Z faces several financial challenges that differ significantly from those encountered by previous generations. The combined effects of rising education costs, a rapidly changing job market, and economic volatility mean that Gen Z must navigate a uniquely uncertain landscape as they strive for financial security.

One of the most pressing challenges is the burden of student loan debt. While older generations may have experienced affordable tuition rates and could often pay off their education quickly after graduating, Gen Z is graduating with significantly higher levels of debt. According to the Federal Reserve, the average student loan debt for borrowers in their 20s is over $22,000, and many struggle to make consistent payments early in their careers. This reality has led some Gen Zers to reconsider the traditional path of obtaining a four-year degree, with many opting for trade schools, community colleges, or skipping higher education altogether.

The Changing Job Market:
In addition to student loans, the changing job market presents a challenge for Gen Z. Unlike Baby Boomers and Generation X, who often benefited from long-term employment at stable companies, Gen Z faces a gig economy that demands flexibility and often lacks the benefits of traditional full-time work. According to the Pew Research Center, 16% of Americans have earned income through gig work, with Gen Z particularly drawn to freelancing due to its autonomy. However, this approach leaves many without employer-sponsored retirement plans and reliable health insurance, which further complicates their long-term financial security.

The High Cost of Living:
The high cost of living in many urban areas is another significant hurdle. Rising rental prices and stagnant wages have made it difficult for many young people to move out of their parents’ homes. A survey by the Pew Research Center found that 52% of young adults aged 18 to 29 were living with their parents in 2020—the highest rate since the Great Depression. This trend can make it challenging to establish independence, save for a home, or plan for the future.

Resilience and Agility:
Despite these challenges, Gen Z remains remarkably resilient. Many have already adopted proactive financial habits, such as saving a portion of their income for emergencies or taking on side hustles to diversify their earnings. However, given the volatility of their economic environment, this generation needs to remain agile, continuously educating themselves and finding creative ways to build a safety net.

Understanding these challenges is critical for both Gen Z and their financial advisors to develop effective strategies for achieving long-term financial health. Whether it’s finding ways to mitigate student debt, navigating the gig economy, or building stable savings, overcoming these obstacles will be crucial for Gen Z as they look ahead.

The Bright Side – Financial Opportunities for Gen Z

Access to Financial Education:
Despite the unique challenges they face, Gen Z also has significant financial opportunities, starting with unprecedented access to financial education. Thanks to social media, personal finance blogs, and online courses, this generation can access a wealth of information about saving, budgeting, and investing. A survey by Charles Schwab found that 63% of Gen Z members are interested in learning about finances through online videos, highlighting their preference for digital learning over traditional sources. This accessibility empowers them to start building financial literacy early, even before entering the workforce.

Higher Savings Rates:
Compared to older generations, Gen Z tends to be more conservative with their spending and more diligent about saving. According to a study by the Center for Generational Kinetics, over 50% of Gen Zers have a savings account, and 21% have a retirement account before age 25. They prioritize saving for emergencies and long-term goals, which could provide a significant financial advantage later in life. Their relatively frugal approach to spending helps them establish a safety net, especially in uncertain economic times.

Digital Tools for Growth:
Digital tools uniquely position Gen Z to manage and grow their finances. Investment apps like Robinhood and Acorns make it easy to invest small amounts regularly, while budgeting apps like Mint and YNAB offer clear insights into their spending patterns. By automating financial habits like savings contributions or spare change investing, these digital tools can help young adults maintain consistent progress toward their goals.

Entrepreneurship and the Gig Economy:
Gen Z’s affinity for freelancing and side hustles can open doors to entrepreneurship. With fewer barriers to entry, online businesses, social media marketing, and freelancing platforms enable this generation to experiment with different revenue streams. While gig work may lack the stability of traditional employment, it also offers the potential to earn supplementary income and build valuable skills. The flexibility can also help Gen Zers explore their interests while maintaining financial independence.

Impact Investing and Sustainability:
Gen Z’s value-driven approach extends to their investments, too. According to Morningstar, 95% of Gen Zers are interested in sustainable investing. This generation prefers putting their money into companies and funds that align with their social and environmental values, such as ESG (environmental, social, and governance) funds. Impact investing allows them to prioritize their principles while potentially achieving competitive returns.

Although Gen Z faces its fair share of challenges, these financial opportunities give them the tools to build a secure future. With the right strategies, they can leverage these advantages to turn the odds in their favor.

Retirement Planning Strategies for Generation Z

Start Saving Early:

Given the uncertainty of today’s economic climate, starting early with retirement savings is crucial for Gen Z. Financial advisors recommend that young adults contribute to retirement accounts like 401(k)s or Roth IRAs as soon as they receive their first paycheck. According to a Bank of America survey, 1 in 5 Gen Zers between the ages of 18 and 24 already contributes to a 401(k). Even small contributions can grow significantly over time due to the power of compound interest. Automating contributions through employer-sponsored plans or savings apps makes the process seamless.

Build a Safety Net:

A solid emergency fund is another essential pillar of retirement planning. A safety net protects against unexpected expenses that might otherwise disrupt long-term savings. Financial planners advise setting aside three to six months’ worth of living expenses in an easily accessible account. This cushion allows Gen Zers to avoid drawing from retirement funds or going into high-interest debt when faced with sudden financial setbacks.

Manage Debt Responsibly:

Student loan debt is a significant concern for Gen Z, but it’s important not to let debt derail retirement planning. One strategy is to prioritize paying off high-interest loans while making consistent payments toward other debts. Consolidating loans or refinancing may provide better terms. Financial planners also suggest avoiding further high-interest debt, like credit card balances, which could hinder savings growth.

Diversify Investments:

While it’s tempting to focus solely on employer-sponsored plans, diversification is key. Gen Zers can explore other investment vehicles, such as taxable brokerage accounts, exchange-traded funds (ETFs), or real estate investment trusts (REITs), to spread their risk. Diversification ensures that their investment portfolio is balanced and can better withstand market volatility.

Collaborate with Financial Advisers:

In an age where robo-advisors and financial apps are popular, many Gen Zers might overlook the value of a human financial advisor. Building a relationship with an advisor can provide personalized advice and strategic planning to reach specific goals. Financial advisors can help create a tailored retirement plan and offer valuable insights into navigating today’s complex financial landscape.

Keep Learning:

The financial world is constantly evolving, so continuous education is crucial. Gen Zers should stay informed by reading personal finance blogs, following credible financial influencers, or taking courses on investing and retirement planning. This ongoing learning will help them refine their strategies and adapt to changes in the market.

With these strategies in place, Gen Z can approach retirement planning with confidence. By building healthy financial habits early on and seeking the right guidance, this generation can overcome challenges and secure a prosperous future.

Conclusion: Navigating the Future with Confidence

Recap of Generational Differences:

Generation Z’s financial habits differ significantly from those of previous generations due to factors like student loan debt, the changing job market, and a digital-first approach to money management. Unlike Baby Boomers and Gen X, who benefited from a more stable economic climate, Gen Z must navigate challenges like the gig economy and rising living costs. However, they also have advantages, such as earlier access to financial education and the use of innovative digital tools that can shape how they approach saving, investing, and planning for retirement.

Key Strategies for Financial Success:

Despite the uncertainty, Gen Z has numerous opportunities to build a strong financial future. By starting to save for retirement early, managing debt responsibly, and working with financial advisors to develop comprehensive strategies, Gen Z can tackle the challenges they face. Building an emergency fund and diversifying investments are also crucial steps toward achieving financial stability. Leveraging financial education through credible sources, from blogs to courses, will empower this generation to refine their strategies continually.

Encouragement for Gen Z:

Gen Z is already proving itself to be adaptable, innovative, and resourceful. While the challenges may seem daunting, their pragmatic approach and value-driven spending habits suggest a bright financial future. It’s crucial that Gen Zers continue to embrace proactive money management strategies and remain resilient in the face of an unpredictable economy. Whether they’re just starting their first job or building a career, seeking the guidance of trusted financial advisors can help them navigate the complex financial landscape.

Use this as a call to action. Now is the time for Gen Z to take control of their financial future. Prioritize saving, plan for retirement, and stay informed about the opportunities and risks that lie ahead. By building strong habits today, Gen Z can navigate the future with confidence and achieve long-term financial well-being.

Edward Caballero is a Financial Planner with Tomren Wealth Management in San Ramon, CA. Tomren Wealth Management is a Team-Based Wealth Management firm specializing in Investment Planning, Retirement Planning, Tax Planning, & Estate Planning.

For more financial education or to speak to someone about your financial plan, visit https://tomrenwealth.com.

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Edward Caballero is a Financial Planner with, and securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/SIPC