Young Adults Need a Financial Plan
It is the best of (economic) times and the worst of (economic) times for young adults in America
today. This demographic has come of age during an unsteady economy and tends to reject
traditional thinking about money and financial planning.
How can advisors reach a generation of Americans who prioritize things like "soft saving,"
"work-life balance," and "sustainable investing?" They are open to your advice - you just need to
know how to speak their financial language.
How Young People Today View Money and Finances
Members of Generation Z, born between 1997 and 2010, have a complicated relationship with
finances that challenges the long-standing goals of working hard, saving money, and retiring
early.
The oldest Gen Zers turn 27 this year, while young adult zoomers are preparing to go to college
or enter the workforce. Among those who are already working, their money is not going as far
due to inflation hitting them harder than all other age groups.1
According to a study conducted by Intuit, two out of three Gen Z adults say they are only
interested in finances as a way to support their other interests.2 The same percentage say they
do not know if they will ever have enough money to retire, and three in four say the current
economy makes them hesitant to set long-term goals.3
Financial Planning Strategies for Gen Z
These are some of the key investing and financial planning trends seen with Generation Z:
- Starting financial planning younger. Seventy-three percent of Gen Zers "got serious"
about financial planning before age 25, more than any other age cohort.4
- Investing sooner. Although Gen Z is investing less overall, they began saving and
investing on average at age 19 - nearly half the age of when baby boomers started
investing.5
- Exploring opportunities outside traditional markets. Younger investors are less
confident that they can achieve above-average returns solely with stocks and bonds.
Instead, they show a greater preference for alternative investments such as crypto, private
equity, and direct investments in companies.6
- Taking action on their investments. A Bankrate survey found that members of Gen Z are
the most active investors: 87 percent of 18- to 26-year-olds bought, sold, or withheld
additional investment last year.7
- Getting advice online. Around 75 percent of Gen Z adults have relied on financial advice
from social media or the internet.8
What does all this mean for advisors working on a financial plan for young adults? Here are
some ideas:
- Credit cards. Gen Z is leading the way in maxing out their credit cards, indicating tight
cash-flow and the need for better budgeting, such as a 60 (needs) / 20 (wants) / 20
(savings) formula. Keep in mind that most Gen Z would rather spend than save.
9
- Passive investing. A long-term investment strategy that relies on buying, holding, and
compounding interest is one of the best hedges against inflation. Let young adults know that
passive investing almost always beats active investing, even among professional fund
managers.
- Essential savings. Gen Z is spending more on essentials like vehicle insurance, housing,
and food, in part because of rising costs. They could benefit from advice about how to shop
economically for what they need and make their dollars go further.
- Paychecks. Automatic savings plans can ensure that more money is left over for essentials
like rent and splurges like travel, helping them achieve the work-life balance this generation
covets.
- Estate plan. Gen Z may wish to prioritize charities in their estate plan that align with their
values.
Gen Z is set to inherit $11 trillion through 2045 as part of the Great Wealth Transfer.10 Instilling
good money habits in them now can help them meet their long-term financial goals and prepare
them for a potential inheritance windfall, which most say they ideally plan to use to invest and
pay off debt.11
Wealth management and estate planning are two sides of the same coin. When counseling
young clients on how to meet their money goals, look for chances to explain the related need to
create an estate plan to protect the investments they work hard to grow.
MEREDITH | PC
4325 Windsor Centre Trail
Suite 400
Flower Mound Texas 75028
214-513-1013
This newsletter is for informational purposes only and is not intended to be construed as written advice about a Federal tax matter. Readers should consult with their own professional advisors to evaluate or pursue tax, accounting, financial, or legal planning strategies.
You have received this newsletter because I believe you will find its content valuable. Please feel free to Contact Me if you have any questions about this or any matters relating to estate planning.
