Gen Z and Money:

Teaching the Next Generation

Written By: Laine Kuether

With Gen Z, the opportunity to instill positive financial habits is especially timely. Parents play a critical role in shaping financial understanding, particularly as this generation grows up with rapid technological advances, easy access to financial markets, and a wealth of online advice. We will explore some behaviors and beliefs Gen Z has about money and provide useful resources to help set up your children for a healthy financial future.

Gen Z and Investing

You may be inclined to think Gen Z does not care about investing. On the contrary, there are studies that suggest Gen Z is starting to invest at an earlier age than previous generations. According to a report by FINRA Foundation and CFA Institute (2022), about 56% of Gen Z between the ages of 18 and 25 reported owning at least some investments. Of the group of Gen Z that reported owning investments, a quarter of them started investing before they were 18.

There are many factors that are likely contributing to this. For example, many employer-sponsored 401k plans now have default contribution rates, requiring new employees to opt-out of a plan rather than opt-in. Additionally, the rise of fractional share stock trading and cryptocurrency has reduced the amount of money needed to begin investing and removed many of the barriers that traditionally stood in a new investor’s way. Gen Z can now download an app on their phones and begin trading with as little as $1.

Gen Z investors generally own higher-risk investments. The most common investment for Gen Z is Cryptocurrency, with over half (55%) of Gen Z holding it (FINRA Foundation & CFA Institute, 2022). The second most common investment is individual stocks, with 41%. Much less popular are Mutual Funds and ETFs, at 35% and 23% respectively. From the perspective of a financial advisor, it is a bit alarming that the most commonly owned investment among Gen Z is an asset class that is still entirely speculative. However, if you set aside the inherent risks of investing in cryptocurrencies, they do offer many features that address the most common barriers to investing new investors face.

Of the group of Gen Z that reported not owning any investments, the most common reason for not investing was not having enough savings. It is not uncommon for a mutual fund to have a minimum initial investment of $2,500, but there are a number of apps today that allow investors to begin investing with no (or very low) minimums. Many of these services are in the crypto and individual stock spaces. While greater access to financial services is certainly a benefit, the downside is that trading individual cryptocurrencies or stocks is generally much riskier than buying and holding an index fund.

Gen Z and Financial Advice

When it comes to where Gen Z gets financial advice, there are quite a variety of sources. Some get financial advice through school or university and from financial companies or apps. The top source cited in the FINRA/CFA report was social media, with 48% of Gen Z investors getting financial advice from scrolling on their feeds. Of those that do use social media to learn about financial topics, YouTube was far and away the most popular platform, with 60% reportedly using it. The next most common were Instagram (44%), TikTok (37%) and Twitter (34%). Social media can certainly be a valuable tool for accessing financial information. There are many intelligent economists, knowledgeable accountants, and even licensed financial advisors who share advice on social media. However, the quality of financial advice on the internet can vary substantially. Not all advice applies to everyone, and some of it is just plain wrong. It is important to listen to multiple sources and understand if there are any biases in the advice being given.

Another important source for financial advice was parents and family, reported by 51% of Gen Z non-investors and 45% of Gen Z investors (FINRA Foundation & CFA Institute, 2022). The impact family has on whether Gen Z is investing or not is substantial. When Gen Z investors were asked what motivated them to invest, 54% said a parent or family member encouraged them to do so. When the study looked at the family dynamics of Gen Z investors vs. non-investors, 79% of Gen Z investors said their parents had conversations about investing with them before age 18, compared to 46% for the group of Gen Z that did not invest.

Useful Resources

The good news is Gen Z does seem to be taking an active role in their financial future. And with a little support from family, many are already saving and investing. With so much information currently available, it can be difficult to know where to start. What follows is by no means a comprehensive list, nor is it an endorsement for any particular resource, but you may find it useful as a starting point.

Articles & Blogs

Articles and blogs can be a great source of high-level information. The Schwab article below gives some quick tips. The Balance has a series of articles specifically about teaching kids and teens about money. Topics range from summer jobs, to investing, to deciding where to go to college.

9 Tips for Teaching Kids About Money | Charles Schwab

Teaching Kids & Teens About Money (Series) | The Balance

Educational Courses

If you want a more structured approach to learning the basics of personal finance, there are a number of online courses on the subject. You can find paid courses on sites like Coursera or Udemy. Just be sure to check the credentials of the instructor. You can also find some free courses put out by large financial institutions. One such example is a course by Inuit for Education, which is free to sign up for. Just be aware that company-sponsored programs may occasionally push their own products.

Educational Apps

Just as there are now apps for learning a new language, there are some relatively new apps designed to help teach financial literacy. The suggestions below are not an endorsement, but examples of what is currently available. Be sure to do proper due diligence before signing up.

Zogo is an app that partners with Credit Unions and Community Banks to provide an engaging app-based learning platform for financial literacy. The app is free to download and offers daily lessons on saving, budget, investing and more.

Greenlight is another app that offers a platform for children to learn about saving and investing. Greenlight appears to be more than just financial education. It has a debit card program for children that allows parents to set up certain controls and notifications on spending. Greenlight also has a program for investing that allows kids to make trades for parents to approve before executing.

Banking & Investing

Many banks have programs specifically for a child’s first checking or savings account. Additionally, many brokerage accounts can be opened and funded with as little as $1. Fidelity Youth is one such program. Some apps, like Stash or Acorns, allow you to “round up” purchases on a debit card and invest the spare change in Stocks or Mutual Funds. There are many great options available but be sure to research a company or app before signing up.

Helping Gen Z navigate the world of money management is one of the most valuable skills you can pass on. By teaching them to spend wisely, save consistently, and invest thoughtfully, you’re giving them tools that will serve them throughout their lives. While this generation has more access to financial information and investment opportunities than ever before, parental guidance remains crucial in shaping their financial future. Encourage open conversations about money, explore educational resources together, and help them make informed choices. With your support, they can build strong financial habits that will empower them for years to come.

References

FINRA Foundation & CFA Institute. (2022). Gen Z and investing: Social media, crypto, FOMO, and family.