What investing means for Generation Z

If you ever want a snapshot of the intergenerational divide, cast an eye round a restaurant (when eating out is finally back to normal!). The chances are you’ll see at least one person more interested in putting their dinner on Instagram than eating it. At the risk of relying on stereotypes, we’d hazard a guess that the Instagrammer in question is young – let’s say born between 1995 and 2010. This cohort of the population now has its very own collective name: Generation Z. They’re the next generation down from millennials, and they’ve been users of the internet from a very young age.

To older generations, Generation Z can seem an odd bunch. Pouting for selfies seems as peculiar a way to spend time as posting a photo of your dinner on social media.

What are they like as investors?

It’s thought that Gen Z will account for one third of the global workforce by 2030. The older Z-ers have just entered the workforce, and very little is known about this cohort as investors. What we do know is that they will be expected to carry high levels of personal financial responsibility; research from PwC suggests they will confront greater difficulties, including economic uncertainty and student debt, than those who came before them.

That sense of uncertainty is borne out by Experian’s survey that found 51% of the Gen Z consumers surveyed were concerned about their financial future in later life, in other words, they were afraid of running out of money. When you consider that this generation grew up in the midst of the global financial crisis, perhaps seeing parents’ earning power cut back, or belts tightened at home, it’s understandable that they are cautious. It’s not all doom and gloom, though. Gen Z were also found to be financially literate and the vast majority had either a debit or savings account.

In addition, their use of financial technology (fintech) should stand them in good stead. The range of apps, including those for investing, is growing all the time, and Gen Z are likely to be among their first users, breaking down traditional barriers to investing.

Sharing knowledge, encouraging learning

Making investment more attractive to young people is, on the whole, a great idea, but it can be problematic. With social media becoming increasingly influential and fake news on the rise, speculative investments may seem to be an attractive option for making some quick money.

During the Covid-driven lockdown, increasing numbers of young people have been seduced by online trading – roughly three million people joined Robinhood (a disruptor trading platform) in the first three months of 2020. Unlike traditional investment business models, which involves ascertaining risk appetite and taking stock of a client’s overall financial situation, many online trading apps (such as Robinhood) are very different. There is little to no scrutiny of the user’s investment knowledge or ability to trade. Meanwhile, the colourful interface and viral confetti feels more like a video game. Robinhood’s ethos is to make investment available to everyone – but that is only healthy if users are well informed and aware of the risks.

Being a member of Generation Z has one unquestionable advantage; they are young and thus have the luxury of being able to invest with a very long time horizon, which will ultimately help them ride out investment volatility. While this younger generation is familiar with some of the most popular investment themes, an all-round knowledge of different investment approaches equips them to enjoy the benefit of diversification over the long-term.

To find out more about investing, please visit our learning hub, where you’ll find a range of resources – for both the experienced and those to share with a novice investor. So perhaps the next time you see a Gen Z family member fiddling with their phone – remember that instead of pursuing the frivolous, they may just be learning for their financial future.

Please remember that past performance may not be repeated and is not a guide for future performance. The value of shares and the income from them can go down as well as up as a result of market and currency fluctuations.

Please note that SIT Savings Ltd is not authorised to provide advice to individual investors and nothing in this article should be considered to be or relied upon as constituting investment advice. If you are unsure about the suitability of an investment, you should contact your financial advisor.