While older Americans prepare for the potential of a pending recession, two in five people in Gen Z say they aren’t prepared for further economic downturn. 40 percent say they haven’t taken any steps to get their finances in order.
Economists are predicting a looming recession, and according to a recent Bankrate survey, Gen Z – people born between 1997 and 2012 – are the least prepared. But that’s not the whole story.
Gen Z often gets a bad rap. While some older adults have referred to Gen Zers as lazy freeloaders with no interest in managing their finances, that’s not the case at all. On the contrary, many of these young adults appear eager to boost their financial knowledge and make well-informed decisions about budgeting, debt management, and investments.
“Gen Z-ers spending behaviors, life goals, and mindset is drastically different from the generations before them,” said Michael Raimondi, a wealth manager with Clarus Group. “Where a previous measure of success was a big house and a fancy car, Gen Z seeks the freedom of choice and is less bound by expectations of what they should do and is more interested in what fulfills them.”
While a lot of Gen Z learn what they can about finance from platforms like YouTube and TikTok, what they really want is someone who knows the ins and outs of money management. Someone who can guide them toward smart decisions in terms of debt management, budgeting, taxes, and investments.
“We work with many Gen Z clients,” said Eric Simonson, Founder of Abundo Wealth. “Far and away, the biggest thing they are looking for is transparency with pricing and user-friendly financial planning technology that they can access on their own between meetings.”
Mixed Messaging
Many from Gen Z will admit they do not fully understand how debt works, especially credit cards and personal loans. Parents avoid teaching their children about borrowing options in hopes that it will deter them from swimming in debt. But people should not hide from debt and what it means. In fact, having some debt history to establish a credit score worthy of making a significant purchase is important.
Financial advisors can help Gen Z individuals learn how to borrow responsibly and provide recommendations on credit cards or loans that can help boost credit scores without spiraling out of control. Similarly, advisors can explain how to borrow money within your means and read the fine print on loan paperwork to determine interest rates, origination fees, and other hidden costs.
Help With Lowering Monthly Expenses
Given that inflation is at an all-time high, most people are concerned about their personal finances.
What’s more, Gen Zers believe their financial situation is more complicated than previous generations due to the ever-increasing cost of living and lack of growth opportunities within major corporations. Whether they realize it or not, they need a financial advisor who can help them find ways to cut down on expenses to stretch their paycheck as much as possible.
In many cases, removing temptation and sticking to a strict budget is an easy place to start. Delete convenience apps and curb online shopping habits. Furthermore, take a hard look at your budget and remove things that aren’t really a necessity, like subscriptions, dining out, and travel. These small changes can lower monthly expenses by hundreds of dollars per month.
Gen Zers can also lower their monthly expenses by making smart decisions when it comes to debt management. For example, the average Gen Z college graduate has between $10,000 and $20,000 of student loan debt. However, refinancing these loans can help save money with lower interest rates and combine multiple balances into a single lower monthly payment.
Of course, there are also several old-school ways to lower monthly expenses too, like ride-sharing or clipping coupons – even digital coupons. These methods aren’t as fun, but every little bit can help.
Someone Who Will Suggest Smart Investment Options
Gen Zers are more active investors than previous generations because they assume Social Security won’t pay the bills by the time they age out of the workforce and need to take matters into their own hands.
This means they want a financial advisor who knows the ins and outs of smart investment options so they can make the best possible financial decisions to provide dividends upon retirement.
Financial advisors who want to work with the Gen Z crowd must be well-versed in cryptocurrency, NFTs, and other investment trends. Furthermore, advisors will need to offer options that are outside of the box and seem enticing since they are less likely to buy into any types of investments they see as outdated or lacking in future potential. Gen Z is also keen on aligning its investments with its beliefs and values.
“We are recognizing that Gen Z wants to align its investments with its values,” says Darryl W Lyons, cofounder and CEO of PAX Financial Group. “Our company has been getting a lot of traction in the Biblical Responsible Investing space,” he says.
Help Maximize Tax Savings
Believe it or not, nearly half of all Gen Z individuals in the workforce are self-employed. However, very few of them understand tax law, meaning they don’t know how to maximize tax returns each year — and this lack of knowledge can cost a single freelancer thousands of dollars in tax payments each year.
Therefore, they are not just looking for someone who can help them invest their money. Gen Zers want a small business financial advisor who can help them comb through their expenses and find ways to translate these necessities into tax write-offs. The more money an advisor can help them save on tax, the more they can turn around and invest.
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This article was produced by Wealthtender and syndicated by Wealth of Geeks.
Rick is a Personal Finance Expert, Best Selling Author of The Financially Independent Millennial, and Co-Founder of Travel Addicts Life, a travel blog that focuses on the life of a traveler.
