Generation Z is transforming how they handle personal finances and money management through a unique mix of digital savviness and financial urgency. Unlike previous generations, Gen Z entered adulthood during an era of economic instability, which influences how they approach saving and financial planning.
Gen Z, born between 1997 and 2012, is dealing with inflation, rising housing costs, and significant student loan debt, but they’re responding with smart thinking and new strategies. Take a look at the challenges Gen Z is facing and how they’re adopting a new movement toward financial independence.
Economic Challenges Drive Change for Gen Z
Gen Z is dealing with financial pressure and some concerning trends:
- Higher debt payment increases
- Above-average student loan payments
- Exceeding monthly budgets
The housing market is also challenging for young adults looking to purchase their first home. High home prices and interest rates push many Gen Z buyers out of the market. Many are forced to cut back on other daily living expenses to pay rent or feel they don’t make enough money to live the lifestyle they want.
A New Approach to Saving
Despite these financial roadblocks, Gen Z is challenging some stereotypes that older generations often associate with young adults, such as the idea that they lack basic financial literacy and responsibility. Instead, Gen Z has demonstrated its early commitment to financial awareness.
- By age 10, many had already opened their first savings account and begun saving for college.
- They report participating in the stock market and demonstrate consistent savings habits.
- Gen Z is saving more and investing smarter to stay ahead of housing affordability and economic uncertainty.
Additionally, Gen Z utilizes social media platforms like TikTok and Instagram, as well as financial planning websites, for guidance and advice on saving and money management.
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The FIRE Movement: Financial Independence, Retire Early
One of the most notable ways Gen Z is forging their own path to financial freedom is through the FIRE movement, or Financial Independence, Retire Early. Many Gen Zers hope to retire in their 50s, which is earlier than the retirement age of older generations. To reach this goal, Gen Z adults need to plan their savings more aggressively.
The FIRE movement encourages adults to save between 50% and 75% of their income, which is significantly higher than the traditional retirement savings goal of 10% to 15%. FIRE has become a popular financial strategy, especially among Millennials and Gen Z, who are increasingly valuing work-life balance.
The movement promotes saving enough to reach your FIRE number before retiring comfortably. You find your FIRE number by multiplying your annual expenses by 25. Then, plan to withdraw between 3% and 4% of your savings each year to cover living costs in retirement.
Some individuals may include part-time work in their FIRE plans to make early retirement more feasible. The FIRE movement requires strict discipline and ongoing effort to track expenses and investments over time.
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Practical Advice: How Gen Z Can Stay Ahead
For some Gen Zers, joining the FIRE movement may seem daunting and unrealistic. However, there are still many ways to stay ahead in the face of economic uncertainty and challenging times. Here are a few practical saving tips:
1. Build a Strong Financial Foundation
Get in the habit of saving a significant portion of your income and focus on building emergency funds even when dealing with a tight budget. Prioritize paying off high-interest debt, especially credit card debt.
2. Seek Reliable Financial Resources
While social media may be convenient, it’s not always a reliable source for financial information. Instead, consult a professional financial planner or local bank and only rely on trustworthy sources. Focus on learning about budgeting, how to manage credit, borrowing, investing and tax-advantaged retirement accounts.
Explore Fidelity Federal’s Financial Literacy Resources >>
3. Start Investing Early
Invest money early to leverage compound growth and consider low-cost index funds for long-term wealth building. Balance aggressive FIRE strategies with realistic income expectations.
How Can We Help You With Your Financial Goals?
At Fidelity Federal, we’re here to help you overcome obstacles to reach your financial goals. Feel free to visit us at any of our branches or easily contact us by clicking the link below!
