Meet Generation Z. They are patient, collaborative and, contrary to popular belief, do not necessarily prefer electronic communication to personal connections. This is according to a new “Gen Z” survey conducted by TD Ameritrade Holding Corporation.
Ranging from ages 13 to 22, members of this group may seem too young to be thinking about their financial futures, but these up-and-coming investors are well aware of the importance of money, and not surprisingly, among their top financial concerns are: affording college (39%) and having a large student loan balance (39%).
Gen Z may have a good reason to have a few financial worries. This generation has seen their parents struggle to pay back their own student loans. Fifty-eight percent of Gen Z parents who were surveyed said they took out their own student loans, and of these, 43 percent are still paying them back. More than half of those parents who are still paying back their own college loans also have a 529 College Savings Plan to support their Gen Z child’s education.
When it comes to concerns about the economy, Gen Z and their parents said they are worried about the same things: Their #1 concern is jobs and unemployment, mentioned spontaneously by 1 out of every 4 survey respondents.
“Increased tuition costs and a bleak job outlook may be a cause for concern to some Gen Z teenagers, young adults and their parents, but being proactive and coming up with a savings strategy early on can help ease some of these financial anxieties,” says Carrie Braxdale, managing director, investor services, TD Ameritrade, Inc., a broker dealer subsidiary of TD Ameritrade Holding Corporation.
Gen Z has good intentions. Seventy-six percent said that saving money is important to them, and 41 percent said they have a budget and follow it closely. When asked what they would do with an extra $500, 55 percent spontaneously replied that they would save it, with another 11 percent saving it specifically for college.
However, Gen Z is also showing signs of developing early bad financial habits. Among those who have a credit card, more than half (56%) have carried a balance for six months or longer. Only 23% pay it off each month. Additionally, 23 percent of 19-to-22 year olds and 41 percent of 16-to-18 year olds claim they do not have either a checking or a savings account. These accounts can be important first tools in learning basic money-management skills.
Those in the Gen Z group who have had experience with more financial products were found to be better budgeters, and on average, they had $850 more socked away in savings than those who didn’t budget as well ($950 vs. $100 saved).
Furthermore, one of the most common denominators for good budgeters was having had extensive discussions with their parents about saving money (67%), compared to those who aren’t good budgeters (34%).
“We found that parents are still the most influential variable when it comes to educating children on basic financial skills,” Braxdale continues. “Parents who work with their children early to develop a financial plan and clearly set financial expectations can help better prepare them for financial success later in life.”
By Ayo Mseka