Born between 1997 and 2015, Gen Z is the first generation to grow up in a digital world. This has created different values and provided them with a different perspective on the world than previous generations. In an environment where millennials have been identified as the poorest generation of all time, Gen Z has an opportunity to learn from prior mistakes and take advantage of the opportunities available in today’s world.
Given that the financial industry has been geared towards wealthy pre-retirees for years, there hasn’t been a widespread adoption of financial advice and guidance for the new generation. In a world where anyone can post financial advice on social media, getting facts and information from trusted sources is becoming even more important and while Gen Z may have different perspectives around money than previous generations, there are still a few timeless lessons that can apply to any generation.
The Importance of Goal Setting
When it comes to personal finance, there’s a lot of moving pieces. The process of trying to learn everything and figure out what needs to be done can feel overwhelming. Before diving into more complex topics like investing and taxes, it’s important to figure out where you want to go and what you want to accomplish. By doing this, you can create a clearer path that lets you make decisions that align with your end goals.
Which Financial Goals Should Gen-Z Set?
Buying a home, paying off debt, starting a family, or starting a business are just a few examples of financial goals for the gen-z generation. These goals require money. But by defining what needs to happen, you can work backwards to figure out how much needs to be saved to reach each goal.
Having goals is great, but the process of setting goals is almost more impactful than the goals themselves. It makes you think about what you want to accomplish and what’s important to you. Some people may want to travel the world while others prefer to live a more minimalistic life. Your goals likely change over time but the practice of setting them and taking time to think about the future is a good exercise that can help form your unique financial values.
Personal Finance Tips for Gen-Zers
Discipline Creates Freedom
Just like with anything, it takes discipline and commitment to form positive habits and make a change. Having discipline in personal finance is important because in life, there are many opportunities to make poor financial decisions. By having financial discipline, you can begin to take control of your life. It opens up the door to new opportunities that allow you to get ahead financially.
Budgeting is one of the most commonly talked about habits and for good reason. Having a budget reduces the chances of living paycheck to paycheck and increases the chances of saving money. Creating a budget takes some effort, but over time, you won’t even have to think about budgeting anymore because it’ll become second nature.
Creating “automatic” discipline is one of the easiest ways to begin forming positive money habits. This can be done by setting up transfers within your bank account that automatically transfer a portion of money into a savings account. The reason this is effective is because it removes the human error from saving. It’s easy to get a paycheck and spend money throughout the month and only save what’s left. But by automating your savings and paying yourself first, money is being saved without having to think about it.
Getting the basics under control and setting up your financial foundation allows for freedom in the future. By saving and investing early, your future self will reap the benefits of those early efforts. No matter what you want to accomplish, financially or anything else, discipline is necessary to reach your goals and get you where you want to be.
Save for Emergencies
You may have heard of an emergency fund before, but it’s such an impactful part of personal finance that it’s worth talking about again. Simply put, an emergency fund is a savings account that is only to be used for emergencies such as covering expenses after losing a job or an unexpected medical bill. And an emergency fund isn’t a special kind of account, rather a separate savings account aside from your typical checking and savings combination.
An emergency fund not only helps cover unexpected expenses, but it also acts as a building block for the rest of your financial picture. After establishing an emergency fund, you can then confidently start to venture into other areas of personal finance where you can begin putting your money to work for you.
When you’re young, saving doesn’t sound like the most fun thing to be doing with your money. But the freedom that comes with an established emergency fund will give you options to do more enjoyable things with your money in the future.
Be Proactive, Not Reactive
Planning for things that haven’t happened yet can feel counterintuitive, but it’s only when it’s too late that you feel that sense of regret that you didn’t take action sooner.
Reactive behavior is found in many areas of life but is prevalent in personal finance and estate planning. We’ve seen countless celebrities with large net worths pass without a will or estate plan. Chadwick Boseman, lead actor in The Black Panther, passed without a will and iconic singer and songwriter Prince, who had a $300 million estate when he died, didn't have an estate plan. These individuals are surrounded by professionals and people looking out for them but still weren’t proactive when it came to their finances. Passing without a will or estate plan is not only costly, but time consuming for the mourning family as they must go through probate and other legal processes to resolve any outstanding tasks.
Additionally, planning for things such as starting a family or saving for retirement is hard to do when you’re young. It’s easy to wait until the time comes to begin preparing. But by being proactive and planning ahead you can be ready, both mentally and financially, for when the time comes. Your future self will thank you for the time and stress your current self helped save.
The Bottom Line
The oldest half of Gen Z is beginning to enter the workforce and in the world we currently live in, it’s important to learn the language of money so you can make the best decisions for yourself and your future.
There’s a lot of information out there on TikTok and YouTube which can be helpful, but not all advice is equal. Getting information from a trusted source can help make sure it’s in your best interest and by keeping these lessons in mind, you can put yourself years ahead of your peers.