The financial future of Gen Z is...

A lot’s been said about Gen Y, or the Millennials, and their approach to finance.

They spend as they earn. They’re wary of credit. They’d rather put money toward life experiences, than think ahead to their retirement.

But there is a new generation steadily emerging as a force marketers and consumer businesses alike would be foolish to ignore – the rapidly growing Generation Z. Born between 1995 and 2012, Forbes Magazine believes this generation is larger even than Gen Y, at 25 per cent of the population.

And though this group may just be exiting high school, so doesn’t yet have the earning and spending power of Gen Y, their approach to finance may have the power to define future consumer and financing trends.

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So what exactly is this group’s approach to its finances?

Born with a smartphone in their hands.

Gen Z is the first generation to be fully immersed in a smartphone-culture from birth. Yes, Gen Y had an iPhone from a very early age, but many members of Gen Z have been using smart devices since before they can even remember. Technological exposure is the defining characteristic of this evolving generation.

This love of technology is guaranteed to affect almost every aspect of how they approach money.

Credit

Gen Z wants credit, but is not interested in debt. As a thrifty generation, they’re not just looking at the price tag – they’re examining what type of value for money they’re receiving. Credit card interest payments simply don’t seem to possess any value for them, so they tend to pay their cards off quickly and responsibly.

Being teenagers during the 2008 financial crises, and seeing the impacts of job loss and a declining economy, has also left Gen Z more money conscious, and debt averse, then their Gen Y peers.

Bank Accounts

Not surprisingly, Gen Z is leading the way in mobile payment adoption. Fifty three per cent of Gen Z has made a mobile payment in the last six months compared to just 37 per cent of Gen Y, 27 per cent of Gen X, and 14 per cent of Baby Boomers. This is the first generation in which a strong mobile app (rather than a brick and mortar presence) may dictate where an entire generation conducts business.

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Non-Bank Finance Companies

Also unsurprisingly, Gen Z seems far more willing to consider non-traditional financial solutions, channels, and instruments than their predecessors. Robo-advisors, non-bank online loans, fractionalised property investment… All of these non-bank options perfectly match this budding generation’s app-based approach to finance, and life in general.

Home Ownership

Home ownership is expected to find footing again with Gen Z. To put this in context, a study published on Time Magazine found that more than half of Gen Z would give up social media and double their homework load for a year if it guaranteed they’d be able to afford a house. This is a big mentality shift from Gen Y, which has been one of the largest “renter demographics” the world has seen.

Business Ownership

Gen Y is becoming known for possessing a “side hustle” mentality. It’s a generation far more likely to have one main job, than work several gigs on the side – either to make ends meet, or to find a way to commercialise a personal passion.

In fact, a recent study that found 61 per cent of high school students and 43 per cent of college students would rather be an entrepreneur following graduation rather than an employee. In this sense, Gen Z could be the most entrepreneurial generation to date.

Clayton Howes is the CEO of digital consumer finance firm MoneyMe (www.moneyme.com.au). He’s an expert in personal finance as well as small business and start-ups.