[ad_1]
Broadly speaking, every generation has its own way of doing things. When it comes to money, Gen Z’s financial habits are quite different from those exhibited by past baby boomers.
The future of finance: Generation Z and their relationship with money
Find out: Get your credit score back on track with these 3 tips for success
See the list: GOBankingRates’ Best Banks of 2023
Challenges facing young Americans include the costs associated with student loans, rapidly rising rents, a volatile job market, and a high inflation environment. Moreover, the emergence of NFTs and cryptocurrencies has caught the attention of many young people.
According to a recent survey by Investopedia, these young consumers (generally in the 18-26 age group) are familiar with the stock market and cryptocurrencies (54% have some type of investment). increase). Three of her Gen Z respondents feel they have more than novice knowledge of financial fundamentals, such as paying taxes and managing debt.
After uncovering recent reports that Gen Z may undermine their financial health through various practices, GOBankingRates asked Chloe Elise, CEO and founder of Deeper Than Money, an expert on the pitfalls to avoid. asked for advice.
Find financial advice on TikTok and YouTube
Generation Z are often lumped together as part of the “influencer generation,” and many turn to social media for inspiration on how to live their best lives, including advice on how to manage their money. is pointing. While other demographic groups are likely to seek financial advice from financial institutions and family members, Gen Z is turning to platforms like his TikTok and YouTube, according to new research from Vericast.
As the survey notes, 34% of respondents in this age group turn to TikTok for financial tips, 33% turn to YouTube tutorials, and only 24% rely on financial advisors. .
According to Elise, this may not be the most reliable information. “I want to emphasize the fact that you can find endless advice online, but you have to find your funnel. That’s the difference between giving advice to the masses and giving personal advice,” she warned.
“That’s why we stress the importance of taking advantage of free advice, but it’s also important as a next step to find a professional who can tailor it to your specific situation. A Certified Financial Coach, You can find a financial counselor or a financial advisor.”
Take our poll: If Elon Musk offered you a job that paid more than you currently earn, would you work for him?
Living with parents while saving retirement money
Another interesting trend among Gen Z workers is that many are choosing to put their paychecks towards retirement savings while living with their parents.
The New York Times, citing a June Credit Karma survey, reported that one-third of young people are still living in their childhood homes, even as the job market recovers from the pandemic. increase. Living at home is becoming a more permanent option, especially as rents skyrocket. One of the financial experts interviewed by the NYT said the results suggest that rent now makes up nearly half of his income, when it should normally make up 20% of his income. said to be due to the fact that
On the other hand, however, the majority of Gen Zers are saving more for retirement than previous generations. CNBC confirms a new report from BlackRock that a young worker is saving 14% of his take-home pay for the future, compared to his 12% allotted by millennials, Gen Xers and baby boomers. I pointed out that Additionally, Gen Z is the “most confident” in their savings.
Is this the correct financial strategy? Yes, no, says Elise, who has another suggestion. “If you can stay home and save on rent…I will use this time to build your emergency fund. If you have the funds, you can take a cushion and go out on your own feet.”
She added: The advantage of paying off debt is that once the debt is gone, the monthly payment is gone. With fewer monthly payments, it will be easier for you to start living on your own. ”
hold large credit card balances
A recent Investopedia survey found that one-third of Gen Z respondents lack basic financial knowledge, such as how to manage debt. A new report backs up the findings, showing that this generation uses credit cards at a rate three times higher than hers than other demographics.
According to credit scoring company VantageScore, balances for this age group are up 30% year-over-year. This figure can be compared to an 11% increase in other demographics. This is likely due to inflation, and as Business Insider points out, the fact that Gen Z’s income hasn’t increased at the pace of their cost of living has led many “Zoomers” to rush to top up. .
Elise says “less is more” when it comes to paying with credit cards. “Credit cards can be a really great tool if you use them to your advantage, not to make the credit card company rich,” she said.
Her tip: Get a basic cash back card at your bank, and if you travel a lot, get a specific travel rewards card to get rewards. But she adds, “Be aware of the annual fee to make sure you’re out ahead.”As she points out, anyone with fair credit credits her The average interest rate on her card is 23.3% (via WalletHub). Also, rotating her credit card balance could result in her paying the credit card company 23% more than she intended.
“That gallon of gas costs a dollar more on your credit card,” says Elise. “We recommend using a debit card until the balance is paid off at the end of each month.”
Cash Stuffing Trends and New Spending Plans
Remember the envelope system? It’s now morphing into a similar “cash stuffing” trend that’s revived on social media and picked up en masse by Gen Z.
Essentially, the process involves marking several envelopes with the categories of monthly payments you want and filling them with various bills. This is a process aimed at allocating dedicated funds for required bills before using them elsewhere. The system works if implemented properly, but some experts say it’s a short-term solution, and that he believes young people aged 18 to her 25 can build credit early. points out that it is of no use to
Elise’s take on this trend is to always spend on a budget. “People should do what is best for them. Budgeting is very personal, but when it comes to budgeting, I like to use the word ‘spending plan.’ Instead, think of it as planning your spending!”
She adds: Is it more than you feel good about spending? Want to spend more money in another region? We teach our clients step-by-step how to create their own personal program with Wealth Her Accelerator. It’s so cool to see it finally resonate with people after so many years. ”
impulse buying addiction
We live in an age of attention spans and social media manipulation. This can be a bad combination when it comes to spending habits. When we see someone post about a lavish vacation or endorse her latest fashion trends, viewers can feel compelled to do the same to keep up with their peers. . Succumbing to such behavior can be devastating to your personal finances.
This is a trend Elise has also seen, and offers advice on how to avoid these problems while protecting your money. “Social media and the idea that we are all bombarded with ads, products, and companies make it harder than ever to spend in a coordinated manner. , to be confident and live within their means Gen Z will find that shoe on TikTok and use the influencer’s promo code to easily buy it in just a few clicks. I struggle with impulse buying,” she says.
“We have found that it is a best practice to add something to your cart and take a couple of hours to think about it so that you can decide if it is an impulsive splurge or if it is something you really want. We encourage you to take a screenshot or favorite the item and come back at the end of the day or week to see if it’s still what you really want.”
For more information on Chloe Elise’s advice and the Wealth Accelerator program, visit www.deeperthanmoney.com.
Learn more about GOBankingRates
Learn more about GOBankingRates
This article originally appeared on GOBankingRates.com: The 5 Biggest Money Mistakes Gen Z Makes and What the Experts Say to Fix Them
[ad_2]
Source link