Gen Z: The Next Generation of Investors

Gen Z (born 1997 to 2013) is a generation of digital natives who were born into a world of technology. They have grown up with instant access to information through smartphones, social media, and the internet. As a result, they have a unique perspective on technology and its role in society.

So, it is no surprise that Gen Z heavily relies on technology when it comes to finances and investments. They are attracted to the increasing ability to invest with small amounts, often using investing apps designed for their generation; the prevalence and popularity of cryptocurrency; the fear of missing out (FOMO) on a key opportunity to make money; and the substantial influence and assistance from their parents and other family members.¹

Generation Z witnessed the fears and problems that stemmed from previous generations. Many of them watched their Generation X parents struggle because of The Great Recession. They are also not so keen on debt, with many opting for lower-cost higher education. Millennials save more money, but Gen Z takes on less debt. As witnessed by many today, this younger generation comes in with the knowledge of past mistakes, making them a wiser force to reckon with. The data shows the difference: 35% of Gen Z already have business plans or have started a business; only 21% of Gen Z wanted to take student loans; 64% of Gen Z started researching and talking to others about financial planning; and 75% of all Gen Z are willing to shift to another state if a job opportunity arises.²

Unlike their parents (Gen X) who traditionally have used lots of mutual funds to invest, U.S. Gen Z investors 18 and over primarily invest in cryptocurrency (55 percent), individual stocks (41 percent), and mutual funds (35 percent).¹ Additionally, younger generations of Gen Z and Millennials are more likely to invest in newer investment classes such as crypto and NFTs than are Gen X investors.

There are some roadblocks for Gen Z. Many do not yet invest, largely due to income constraints and the challenge of meeting expenses, as well as a lack of education and knowledge about financial topics and limited familial influence. While Gen Z’s approach towards debt is positive, there is a possibility that they are missing out on the big picture by avoiding it altogether. They need to learn that not all debt is alike or bad.

How do you talk to Gen Z about their finances and investing? Share your experiences, encourage learning and education, and talk to your own financial advisor. Your financial advisor is a tremendous resource of information that you can use to help make the next generation of investors successful.