Are You Smarter About Money Than a Gen Zer?

Given how clueless the average millennial is about finances (or at least believed to be), I’m not too embarrassed to admit I never gave a thought to retirement planning until just recently. I always contributed to a 401(k) if my employer offered one and my parents and I opened a Roth IRA years ago, but I couldn’t have told you the status of either account without doing some digging. And as a debt-free only child to parents who have lived frugally, saved their money wisely and invested in real estate, I grew up with the mentality that when it comes to finances, things will be “taken care of.”

Something clicked earlier this month around my 35th birthday, and I realized it was time to take a bit more control of my financial future. I took a close look at my existing retirement accounts, opened a new investment account with my Dad through Vanguard, and began formulating a contribution plan for all three.

As I mentioned above, millennials are often stereotyped as unwise about saving and not prepared for retirement. And the generation below them – Gen Z, those born in or after 1997 and now aged 21 and younger, according to the Pew Research Center – might be benefitting from the harsh lessons they’ve learned from their big brothers and sisters. Word on the street (or out of the research firms) is that Gen Zers, many of whom witnessed financial hardships caused by the Great Depression, are already hooked on saving and preparing for retirement. Here are just a few stats on the young penny pinchers recently reported by Business Insider and Newsweek:

• According to a 2017 study by the Center for Generational Kinetics, one in five Gen Z respondents said debt should be avoided at all costs, and 21% opened a savings account before age 10. It also found 12% of Gen Z has started saving for retirement and 35% plan to start in their 20s.
• A Lincoln Financial Group study found 89% of Gen Z respondents are particularly optimistic about their financial future, compared to 83% of millennials and Gen Xers, and 78% of boomers. Plus, 64% of Gen Zers said they had their own savings account, compared to 51% of older savers.

Knowing this about their youngest pool of members and potential members, what can credit unions do to help Gen Zers stay on this impressive track? Here are a few thoughts on helping them get started with retirement planning and investing:

Offer a resource that teaches them the basics. This could be done through a section on your website or mobile app, or an onsite or virtual seminar, and should answer questions such as: What types of retirement and investment accounts are out there? How much should I be putting away and when? What’s the best way to get started with buying stocks? When should I choose a high-risk investment over a low-risk investment? Note: In my opinion, these are the types of questions that should be answered in a junior high or high school classroom. I don’t know what they’re teaching today, but when I was in school in the 90s, personal finance certainly didn’t take priority. If that’s still the case, that’s where you can come in.

Go digital or go home. Gen Zers are digital natives, so any initiative you launch to educate them on savings or attract them to your investment products better be mobile-friendly. So, if a young member is matched up with a personal banker, for example, give them the ability to set up and change appointments through their smartphone and receive appointment reminder texts.

Consider real estate investment training as part of a Gen Z financial education program. While it’s much harder and more expensive to buy property now than it was decades ago, real estate is a long-term investment that’s hard to get wrong. Living in a purchased home and building equity instead of flushing it down the toilet every month in rent is one thing (and a smart thing), but if you can acquire one or several rental properties, the rent will become substantial passive income once they’re paid off. Of course, managing tenants can be a full-time job in and of itself and isn’t for everyone. As a daughter of long-time landlords, I’ve heard many horror stories, from sightings of holes punched through the wall (literally) during a move-out inspection, to receiving texted photos of used needles on a laundry facility floor, to combing through mugshots of prospective tenants online to get a better picture of their criminal history. But if you’re lucky enough to land decent tenants, rent can be an excellent income stream option later in life.

Ask, what is my CU doing to help young entrepreneurs? When it comes to investments (not in a traditional sense, but of time and resources), one of the riskiest yet potentially most rewarding is starting your own business. Millennials are known to be more entrepreneurial than older generations, but Gen Zers are taking it a step further – Gallup found eight in 10 students in grades five through 12 want to be their own boss, and according to a Millennial Branding study, 72% of high school students want to start their own business. The 2015 Filene Research Institute report “Are Credit Unions Doing Enough to Help Young Entrepreneurs?” made suggestions that are still relevant today: Offer microloans, work spaces and business development tools; host business competitions; support applications for local scholarships/grants; and showcase local, talented entrepreneurs.

Gen Z’s financial future is yet to be determined, but if these early survey findings ring true, that’s good news not only for Gen Zers but for credit union executives as well – you’ll spend less time educating them and collecting on their debts, and more time hooking them up with the products and services they’ll need to thrive.

Natasha Chilingerian is managing editor for CU Times. She can be reached at nchilingerian@cutimes.com.