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As Generation Z move out into the world of finance, they will have access to the tools and skills learned by previous generations, giving them the opportunity to avoid the financial mistakes of other generations. Generation Z consists primarily of people born between his late 1990s and his early 2010s. This generation follows in the footsteps of millennials and is entering the financial arena with a very different way of thinking about money and investment strategies than other generations.
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As the first generation to be fully digitally savvy, Generation Z tends to use e-money apps and social media sites such as TikTok for their financial needs. Instead of reading about money advice, this generation is image-driven, getting most of their financial news from his TikTok or short video clips online.
Generation Z may use a different approach when it comes to finances, but they have all the tools and expertise they need to make the smartest investments and financial choices this year. Let’s take a look at the top 5 money steps to consider.
start saving for retirement
A key investment every Gen Z should make in 2022 is to start securing their retirement finances. For those new to the investment scene, the Roth IRA is a great place to start.
“Roth IRAs are more flexible and versatile than traditional IRAs,” said Doug “Buddy” Amis, CFP and CEO of Cardinal Retirement Planning, Inc. ”
build your credit score
Building a good credit score for the future is essential when making big financial purchases, such as buying a home or accessing an emergency loan. The sooner Gen Z can start building a good credit history, the better.
“Your credit score determines your access to debt, which can help you get out of a tough situation by making a big investment like a home or paying an emergency expense,” says Hoskin. “Personal access to credit is one of the determining factors in one’s financial life and should be a top priority.”
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“Get a credit card and a small personal loan to start taking credit,” Hoskin said. “This loan will require you to practice paying on time every time. Credit cards ask you to practice conscious spending each month.
Focus on financial literacy
Improving financial literacy is not only cost-free, it is also one of the most valuable actions every Gen Z should take before making a major investment decision.
“The more you know, the less you pay,” said Nathaniel Hoskin, founder and chief counsel at wealth management firm Hoskin Capital. “With financial literacy, you can avoid fraud, take advantage of opportunities, and answer poignant questions like ‘Where should I invest my money? And “Which account should I put my money in?”
According to Amis, it’s also important for Gen Z investors to be aware of how the careers they’re pursuing are tied to economic conditions such as stock and real estate markets.
Know when to avoid investing
It may seem obvious, but it’s always best to avoid investments you don’t fully understand.
“If you can’t explain to your brother or sister how it works or how it doesn’t work, give them the ‘opportunity’ to gamble their hard-earned money,” advises Amis.
If you’re new to investing, one bad investment can have a huge impact on your financial health. To invest wisely, it is important to be aware of investment risks and to carefully evaluate investment opportunities in advance.
Sam Boughedda, Equity Trader and Principal Stock Market News Writer at AskTraders.com, said: “Before you take the plunge, learn about the industry you want to invest in.”
If you’re hearing a lot of hype about investment opportunities, it might sound too good.
“Research and learn about the potential pitfalls of investing. Don’t believe the hype when someone says you can get big returns with minimal effort,” says Boughedda. . “It may sound too good to be true, but it usually is.”
With so many “get rich quick” investment opportunities out there, it is also important for Gen Z to be aware of the risks involved in investing in speculative assets.
“Avoid NFTs, cryptocurrencies, and anything with limited resale capabilities (such as non-traded alternative investments and structured products),” Amis said.
create healthy money habits
If your goal is to start investing or completely change how you spend your money, consider implementing small changes and making big ones.
“Focus on small daily changes instead of trying to overhaul your money habits in the New Year,” says Hoskin. “Rather than aiming to save $1,000, aim to save $20 a week. Or, instead of investing all $6,500 in a Roth IRA, aim to invest $125 a week. Success depends on discipline and consistency.”
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