By Kelley Muhsemann
Marketing Manager
Wrapping up Financial Literacy Month, the fourth and final article in our financial literacy series takes a deep dive into the budding Generation Z. More commonly referred to as “Gen Z,” this cohort was born between 1997 and 2012, and make up about 14% of the U.S. population.
According to a study done by Ernst & Young LLP, 69% of Gen Z individuals rate their current financial situation as fair or worse, 32% rate it as poor or very poor, and 52% are very or extremely worried about not having enough money. This group faces specific challenges, including financial uncertainty and anxiety, soaring inflation, and managing multiple income streams.
Challenge #1: Money Anxiety
Despite being adept savers and leading the charge in destigmatizing open discussions about money, Gen Z still grapples with significant money anxiety. This likely stems from growing up in an economically uncertain environment, with stagnant wage growth and rising costs of living. Addressing the root causes of money anxiety is crucial for fostering financial well-being among Gen Z. This cohort should aim to understand the factors contributing to economic uncertainty, and practice effective coping mechanisms. Incorporating things like stress management, resilience-building, and mindfulness techniques tailored to financial concerns, and promoting financial stability through budgeting, saving, and long-term financial planning, can instill confidence and reduce anxiety surrounding money matters. Creating safe spaces for open dialogue about financial worries can further support Gen Z in navigating their financial journey with resilience and optimism.
Challenge #2: Inflation
Inflation poses a significant obstacle for Gen Z, as they contend with unprecedented price increases on goods, services, and education, coupled with stagnant wage growth. These economic conditions threaten their purchasing power and financial stability, exacerbating existing financial anxieties. Easing the impact of inflation on Gen Z requires proactive measures, like understanding the causes and implications of inflation for personal finance, and investing in assets that outpace inflation to help safeguard against erosion of purchasing power over time. Long-term financial planning and diversification can provide support against inflationary pressures. Additionally, advocating for policies that back economic growth and wage increases can address the root causes of inflation, benefiting Gen Z and future generations alike.
Challenge #3: Technology and the Gig Economy
Often dubbed as “digital natives,” Gen Z is deeply entrenched in technology and the gig economy. Although technology provides accessibility to financial information and opportunities, it also presents serious risks. Platforms like “FinTok” on social media can offer financial advice from seemingly professional sources, but without proper qualifications, creating a breeding ground for unreliable guidance. Moreover, the gig economy means Gen Z earns income from multiple sources, requiring tailored tax strategies and financial planning from credible sources. Gen Z must be able to discern credible money advice online and understand the gig economy’s financial implications. Encouraging skepticism and critical thinking when consuming financial content on social media can help safeguard their financial well-being.
The Role of Fee-Only Fiduciary Financial Advisors
Luckily, Gen Z is inherently skeptical, with 67% believing that most people can’t be trusted. In navigating the complex financial landscape, working with a fee-only financial advisor can be instrumental for this group. Unlike advisors who may receive commissions or incentives for recommending specific financial products, fee-only advisors operate solely in their clients’ best interests. This alignment eliminates conflicts of interest and ensures that recommendations are tailored to meet the unique needs and goals of Gen Z individuals. Additionally, fee-only advisors are legally bound to prioritize their clients’ financial well-being, providing peace of mind and confidence in their guidance. By partnering with a fee-only fiduciary financial advisor, Gen Z can receive well-balanced advice, personalized financial planning, and ongoing support to navigate technology integration, money anxiety, and inflationary pressures effectively, empowering them to make informed financial decisions for their future.
If you have questions regarding financial literacy, contact our team of CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals at 631.218.0077 or click here to get started.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, Beverly, Massachusetts, and Naples, Florida office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We help clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, click here.
The Author used elements of OpenAI to aid in creating this article: OpenAI. (2024). ChatGPT (3.5) [Large language model]. https://chat.openai.com
