Concerns regarding the financial future of the younger generation are prevalent among parents. Recent research shows that only 42% of adults believe that today’s youth will experience a higher standard of living compared to previous generations. This figure represents a significant decline of 18% since the survey conducted in 2019.
However, despite the prevailing pessimism, there are reasons to be optimistic about the financial capabilities of Generation Z. Although not all members of this generation have reached adulthood yet, as it encompasses individuals aged 11 to 26, available data suggests that they are demonstrating positive money management skills and attitudes.
Here are 5 signs your kids will be better off financially.
1. Kids cannot get credit cards
Prior to 2009, credit card companies employed a questionable tactic of targeting college campuses to entice inexperienced and ill-prepared students into signing up for high-interest credit cards. These companies would often set up booths on or near campuses, offering enticing incentives such as free T-shirts or slices of pizza in exchange for signing up.
However, the introduction of the Credit Card Accountability Responsibility and Disclosure Act in 2009 brought about significant changes to these practices. This act implemented regulations that aimed to protect young adults from predatory credit card practices.
One notable provision of the CARD Act is the requirement for individuals under the age of 21 to have a cosigner or demonstrate independent income that is sufficient to repay the credit card debt. This provision ensures that young adults are better equipped to handle the responsibilities and potential financial burdens associated with credit card usage.
2. They have already experienced economic crisis
Millennials, prior to the financial crisis of 2008, had limited exposure to challenging economic conditions. However, the events of 2008 served as a harsh awakening, as many individuals from this generation experienced firsthand the impact of the economic downturn, including job losses, reduced financial security, and overall instability.
In contrast, the generation known as Gen Z has already faced significant trials early on in their lives. They have witnessed the effects of the global pandemic, which led to widespread unemployment, economic uncertainty, and disruptions in various aspects of daily life. Unlike previous generations, Gen Z has had to navigate the challenges posed by the pandemic and its aftermath, providing them with a unique perspective on financial hardship.
The exposure to these challenging circumstances during their formative years has the potential to shape Gen Z’s financial behavior in a distinct way. Having witnessed the consequences of economic downturns and the importance of financial preparedness, this generation may display a heightened sense of caution compared to previous generations.
3. Majority of them will learn personal finance in school
At present, in the United States, a total of 23 states have implemented a graduation requirement for high school students to take a personal finance course. This signifies a growing recognition among policymakers and educators about the significance of financial literacy in preparing young individuals for their financial futures.
Moreover, the importance of personal finance education is gaining further momentum as evidenced by the existence of 76 active bills in various state legislatures, indicating a potential increase in the number of states mandating such courses.
The inclusion of personal finance education in high school curricula aims to equip students with essential knowledge and skills to navigate the complexities of financial management. Equipped with the knowledge and skills to make informed financial choices, they will build a solid financial foundation, and most probably achieve long-term financial well-being.
4. They have access to saving tools
Saving money can be challenging, especially when faced with the temptation of immediate gratification or when trying to break ingrained spending habits. It’s important to recognize that our approach to money is often influenced by psychological factors rather than purely mathematical considerations.
To address this, a lot of innovative savings apps have emerged, offering a solution to help individuals save and invest effortlessly. These apps utilize the power of automation and technology to make saving money a seamless and almost invisible process.
For example, many apps can be linked to your bank accounts and credit cards, and they monitor your transactions and automatically round up your purchases to the nearest dollar. The spare change accumulated from these round-ups is then transferred to a designated savings or investing account.
The idea behind these apps is to eliminate the reliance on willpower and manual savings efforts. By automating the saving process, individuals can passively accumulate savings without having to actively think about it.
5. Most of them already have retirement in mind
According to a recent survey conducted by The Center for Generational Kinetics, an overwhelming majority of Gen Z, representing 70% of respondents, recognize the importance of investing for retirement.
This indicates a positive shift in mindset towards long-term financial planning among younger individuals. Furthermore, the survey revealed that 30% of Gen Z already have a retirement account in place, demonstrating a proactive approach to securing their financial future.
The growing emphasis on retirement saving among Gen Z can be attributed, in part, to the significant impact of recent events such as the COVID-19 pandemic and rising inflation rates. A study conducted by BlackRock, a global investment management firm, found that a staggering 90% of Gen Z individuals acknowledged that these external factors have influenced their attitudes and perspectives on retirement saving.
It seems that the volatility and economic uncertainty experienced during the pandemic, coupled with concerns about the rising cost of living, have prompted Gen Z to prioritize their long-term financial security.