Gen Z Is Getting an Early Start on Financial Independence

Gen Z, the generation born between 1997 and 2012, is making its presence – and preferences – known. As of 2023, The U.S. Census Bureau reports that about 20% of the U.S. population falls into this cohort. According to a 2023 trend forecast report by Glassdoor, It is expected that in 2024, the percentage of the U.S. workforce comprising its youngest workers (Gen Z) will outnumber its oldest workers (Boomers).

The older members of this generation are in their late twenties. They are becoming established in their careers, against a global and economic backdrop unlike any generations before them. They have faced the highest levels of inflation and interest rates seen in decades, at a point when they are at the most vulnerable stage of their careers and financial lives.

They’ve also seen skyrocketing housing prices, a global pandemic, and heightened geopolitical uncertainty. Arguably on the positive side, the labor market has been strong, and work has probably permanently shifted to allow for at least a hybrid of remote and in-person work, opening up new opportunities and ways of working.

As a result, this generation has a unique perspective on money, work, and their financial journey.

Gen Z Characteristics: Defining a Generation

The first truly digital native generation has grown up taking access to information completely for granted. The world has always literally been at their fingertips. They have also grown up with the democratization of the public discourse and the dominance of social media as a force in everyday life, through platforms like YouTube, Reddit, X, TikTok, Instagram, and Discord. They get news, product recommendations, advice, coaching, shopping financial education, and financial literacy through these platforms.

Gen Z has a point of view about the world, and they are vocal about it. They want the brands they support to reflect their values. Not surprisingly, mental health is high on the list of concerns, as is social responsibility, support for LGBTQ+ rights, racial and gender equity, and sustainability.¹

The Gen Z Money Mindset: They’re Taking Action

Bank of America’s 2024 Better Money Habits survey took an in-depth look at Gen Z’s financial health. Coping with high costs of living was cited as a top financial challenge, and over half of Gen Z doesn’t have an emergency savings account that could cover three months of living expenses.

The good news is that a majority feel confident on the financial basics, such as managing day-to-day expenses, sticking to a budget, and wise use of credit. They are also implementing lifestyle changes to help offset expenses, including cutting back on dining out or shopping at more affordable grocery stores. True to the direct and transparent ethos of this generation, almost 40% said they are comfortable declining social activities and being upfront about lack of money being a reason for not attending.

More than any other age group, a Bankrate survey found that Gen Z has turned to a side hustle to improve their financial stability. The prevalence of technology has made entrepreneurship not only possible, but potentially profitable and successful. Tying in with this, about half of Gen Z say they are conducting banking online at digital-only banks with no brick-and-mortar branches, to take advantage of lower fees and higher interest rates.

Gen Z also begins saving and investing at younger ages. A FINRA Foundation and CFA Institute study reported that 56% of U.S Gen Zs own at least some investments. Almost 20% are currently investors in only crypto. Given their comfort technology, it’s not surprising that 65% of Gen Z investors do so on investing apps.

Gen Z’s Long-Term View

A May 2024  survey by Goldman Sachs Asset Management found that 44% of Gen Z respondents expect to retire before age 60. The same survey found that median retirement savings is $29,000. A Northwestern Mutual survey from January 2024 found that Gen Z is starting earlier in retirement savings than any other generation, at age 22. That’s five years before Millennials started, and 15 years before Boomers got serious about retirement.

They are also savvy about the value of retirement benefits offered by an employer. 65% of the class of 2024 college seniors said they would turn down a job that didn’t include an employer-sponsored 401(k) plan. And when they are offered those benefits, they take advantage of them. Vanguard reports workers aged 18-24 were 32% more likely to contribute to a workplace retirement plan than older colleagues were at the same age. ²

The Bottom Line

Gen Z is at the beginning of the financial journey, but while they face challenges, they are solidly underway towards financial independence.

1. Emarketer; Guide to Gen Z; February 23, 2024.
2. Vanguard, Generational Changes in 401(k) Behaviors, 2023.

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