Survey: Gen Z Is Turning To Their Parents for Financial Advice — but Here Are 5 Reasons They Shouldn’t
Written by
Martin Dasko
Edited by
Zuri Anderson
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A recent survey from GOBankingRates found that 64% of Gen Z (18- to 24-year-olds) completely or somewhat trust financial experts, while only 49% of adults ages 65 and over felt the same way. The survey also discovered that 58% of Gen Z get financial advice from parents and only 24% get advice from credentialed experts. In a surprising twist, 53% of Gen Z considered TikTok to be the least trustworthy source of financial advice, despite being the core demographic of the platform.
According to the recent Retail Investor Survey from Betterment, 75% of investors shared that they feel their generation has a fundamentally different approach to wealth-building than previous generations. While it can be helpful to get financial guidance from your parents and older relatives as a young person, this may not always be the most reliable source of information.
GOBankingRates spoke with financial planners who shared why parents can sometimes be misguided when it comes to giving financial advice.
Reason No. 1: They Grew Up During a Different Time
“Though well-intentioned, parents giving financial advice from their perspective aren’t able to take into context the complexities of today’s financial world,” said Ivan Watanabe, a financial planner and managing partner at Opus Private Client LLC.
The key reason why young people should be cautious about taking financial advice from their parents is that there’s a generational gap, and times have changed over the last few decades.
“Our parents grew up in a generation where the steps to attain financial independence looked and felt somewhat different than they do today,” said Erica Grundza, a certified financial planner (CFP) at Betterment. “It’s important to remember how times have changed because even well-intended advice may be based on a rulebook once written during vastly different economic conditions.”
The experts agreed that the economic conditions have changed so much that financial advice from a previous generation may simply not apply anymore. The approach to career growth, building wealth and general lifestyle isn’t what it used to be, making it difficult to relate to other generations.
Reason No. 2: Gen Z Has a Different Overall Financial Landscape
On a similar note, it’s important to stress that Gen Z is facing unique issues that previous generations may not have had to deal with, as the overall financial landscape is much different.
“Mortgage payments today represent significantly more of cash flow than in previous generations, making home buying less attractive than it used to be,” Watanabe added.
Grundza pointed out that the average age has increased for traditional major life milestones like marriage, parenthood and homeownership. This means that lifestyle decisions and demographic differences can be a huge factor in the financial advice that can help someone.
For example, someone graduating from college in the next few years could be more interested in traveling the world or trying to grow a business rather than following the traditional route of finding a stable job and building a family.
Watanabe also noted that tenure in a company is significantly lower than that of previous generations. A young person entering today’s workforce isn’t likely to stay with the same company for their entire career, like their parents may have done.
Reason No. 3: Gen Z Has Opportunities That Didn’t Exist Before
On the other hand, Gen Z has opportunities that previous generations couldn’t even fathom a few decades ago.
Watanabe pointed out that Gen Z has the ability to earn a significant income from using a cell phone and social media, presenting an opportunity that has never existed before. A young person today could create an income stream from posting content on Instagram or Facebook that helps them replace a 9-to-5 job and allows them to be mobile with their lifestyle.
“We are seeing young adults today prioritize gaining sustainable employment with benefits, getting a handle on their debt and experimenting with living within their means while learning how best to save for their retirement and other long-term goals,” Grundza added.
Younger people today have more options, so they don’t have to accept the first job that comes their way while feeling the pressure to purchase a home right away.
Reason No. 4: There Are New Assets Available Today
Watanabe pointed out that assets such as cryptocurrency weren’t in existence back when the parents were kids, so it could be difficult for them to understand the current market. Young people today have more options for how they can invest and what they can invest in.
Dr. Daniel R. Gilham, a CFP with Farther, said, “Parents might be too conservative in their approach due to their previous aggressive investing, or experience growing up in a less affluent environment, suffering from loss aversion. Conversely, parents might be more aggressive in their advice, wishing they had invested more at a younger age, suffering from herd mentality.”
Gilham believes that for the best advice, investors — young or old — should seek guidance from an objective party who invests time to understand the nuances of the investor’s situation. This leads us to the next point.
Reason No. 5: There Are Many Ways To Invest Your Money Now
“Access to a robo-advisor that automates investing, tax planning strategies and additional features on retirement and education savings accounts may be newer concepts to those who began their investing journey decades prior,” Grundza remarked.
Gen Z can choose to automate their investments and rely on robo-advisors to handle everything, which is an option that their parents didn’t have. This means that younger people are less likely to rely on traditional financial planners because they know that they have access to quality help.
The general sentiment from the financial experts is that the opportunities and challenges of today’s youth are vastly different compared to previous generations. Grundza concluded, “It’s important for any new investor to review all options so that they can develop their own investment and savings strategy, which paves the way to their own vision of financial stability and long-term success.”
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