Research shows Generation Z think about and handle money differently than the generations before them. But what can they do even better to prepare for the future? When it comes to money and the future, you don’t want to be sleeping on the job.
Gen Z’ers, it would appear, are not zzzzz-ing. They are wide awake and thinking about financial wellness.
A 2022 study that involved 4 000 American adults – 1 000 each from the Baby Boomer, Generation X, Millennial and Generation Z generations – showed that 18 to 25 year olds today are far more financially literate than what previous generations were at the same age. More of them are also already investing than what older generations did as young adults. There is, unfortunately, no similar data available for South Africa’s Gen Z, but we do know from a study done here also in 2022, that young adults get their investment advice from social media. No surprises there, right, given that Gen Z grew up alongside the internet and have been exposed to social media for a large part of their lives.
While it is excellent news that local Gen Z’ers are interested enough in investing to go look for advice, TikTok and Instagram should be handled with care. Many influencers get paid to promote the products and services they talk about. So, just because someone you like and respect as a musician, entertainer, sportsperson or social commentator talk about an investment vehicle, it doesn’t mean that it is a great product.
Even when people don’t get paid, we know that there is as much useless as useful information on social media, so none of us should believe everything we see and read.
What these two research studies have in common, is that in both participants have said that they if they are not yet investing, it is because they don’t know where to start.
Here are some tips to help you get started (whether you’re a Gen Z’er or not):
- Start today. As we said in this post compound interest is a powerful force to grow your money and you get the most benefit from it the more time you give it to work.
- Don’t be intimidated. If “investment” scares you, then start “saving”. Both activities involve putting money away and not using it to get through the month.
- Start simple with a tax-free savings account (TFSA). It is called a savings account, but a TFSA gives you the most value if you leave the money in it for years and years. This long-term approach combined with the tax breaks you get, makes a TFSA a simple but very effective investment vehicle.
- Boost the investments you already have. If you work for a company, chances are you have a pension fund into which a portion of your salary is paid every month. That’s an investment. You can add to it by asking HR and Payroll to increase your monthly contribution.
- Learn more about money management and investing. We live in a time where information is all around us and readily available. Our biggest job is to check facts and not believe everything we see, hear or read. Check the credentials of the fin-fluencers on social media, listen to a variety of opinions and get advice from “old-fashioned” licensed financial advisers. The more you know, the better questions you can ask and the better decisions you can make.
These five steps will get you started. Then, as you learn more, you can invest in different and more sophisticated investment vehicles. You will never know everything, so don’t wait until you think you will.