Gen Z’s Impact on the Economy Is Leading To Major Changes With Credit, Investing and More

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Although the oldest among them are barely in their mid-20s, Gen Z has already transformed American culture and the economy — and they’re just getting started. Gen Z’s fervent social activism is sometimes mistaken for socialism, but in reality, the youngest Americans are proving incredibly adept at using the free market to their advantage.

More About Their Impact: Generation Z: The Future of Finances
Read: 34% of Gen Z Is Learning Personal Finance From TikTok and YouTube, Survey Finds

“Contrary to popular belief, Gen Z actually puts more faith in capitalism than millennials do,” said Elliot Padfield, a senior partner at Padfield Media, a Gen Z-focused ad agency. 

From advertising and investing to self-branding and issue-conscious spending, Gen Z’s fingerprints are all over the economy of the only century they’ve ever really known.

“Gen Z is defined by its status as the first truly digital-native generation, with even the oldest of the set unable to remember a time before cell phones and widespread internet access,” said Macy Gilliam, an international business management student and a Gen Zer herself. “This is absolutely fundamental to understanding everything else about them.”

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And everyone should have an interest in understanding them, because like it or not, they’re reshaping the economy in their own image and the future belongs to them. 

See: Surprising Ways Gen Z and Millennials Are Worlds Apart Financially

Gen Z’s Economic Star Is Rising — and They Know It

Visual Capitalist recently reported on a gaping generational wealth gap in the United States. Currently, the silent generation and baby boomers combine for an incredible 70% of all household wealth in America. Gen X is well behind them, but still way ahead of millennials.

Gen Z is now poised to break that trend.

“Among all generational groups, Gen Z’s economic power is the fastest rising,” said Andrea Chapman, who analyzes Gen Z’s spending and saving patterns in her position as marketing manager for Nature and Bloom. “As they join the workforce, their income is predicted to rise more than fivefold to $33 trillion by 2030, accounting for more than a quarter of global GDP, and exceeding millennials’ income by 2031.”

Find Out: 5 Financial Steps Gen Z Should Be Taking Now

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A recent Bank of America Global Research study backs up those astonishing numbers to the dollar — and that’s just their income. The report also describes the unprecedented windfall that Gen Z is set to receive in the form of collective inheritance. As previously stated, the two oldest generations are sitting on more than two-thirds of the country’s household wealth. As time takes its toll, much of that $78 trillion will land squarely in Gen Z’s digital wallet.

As their incomes rise, so will their collective purchasing power — and all the political leverage that comes with it. That growing muscle is what compelled Bank of America to call Gen Z the “most disruptive generation ever.”

“Gen Z will soon be the largest consumer segment,” said Alix Greenberg, founder of ArtSugar, a millennial/Gen Z-focused e-commerce art curation retailer. “And with more than $300 billion in spending power, this generation is altering shopping trends and influencing the world economy.” 

More: 4 Industries Gen Z Might Save — and 4 It Might Destroy

With Purchasing Power Comes Enormous Cultural and Political Influence

If a demographic has hundreds of billions of dollars worth of buying power, you better believe that America’s corporations will cozy up to the ideas that they care about — and their beneficiaries in Congress won’t be far behind. 

“Gen Z recognizes how their choices affect not just themselves, but the larger population and Earth as a whole,” said Lisa Odenweller, founder and CEO of Kroma Wellness. “They understand climate change and are looking for ways to help, both big and small. That means their investments are going into brands that lead with ethical values and are taking direct stands on important issues. They especially seek brands that consistently donate to charitable causes, offer support in response to climate disasters and injustices, and are open, honest, and active around D, E, and I initiatives.” 

The Deloitte Global 2021 Millennial and Gen Z Survey revealed the following facts about Gen Z:

  • 52% donate to charities
  • 49% make choices about who they’ll work for based on personal ethics
  • 40% have been a volunteer or member of a community organization, nonprofit or charity
  • 40% created social media content to bring attention to a social, political, environmental or human rights issue
  • 30% have participated in a rally, march or protest

See: 7 Moves Gen Z Should Be Making To Protect Themselves Financially

They’re Not Settling for Lip Service and Half-Measures

Gen Z has also proven stubbornly unwilling to fall for corporate window dressing. 

“Gen Z is not letting brands get away with hollow claims around social issues,” said Hector Gutierrez, the CEO of JOI. “They are noticing brands that make statements only during Pride Month, for example. They are seeking year-round support, bold action, and specific data on how brands are operating and supporting larger issues in the world. As a result, Gen Z is rewarding brands that speak truth to power by not only spending money on them but by sharing their story widely with their online and offline communities. Consumers have become the biggest brand advocates.”

That advocacy is working. 

“The economic pressures that Gen Z is putting on companies can be seen in the changes and choices of industry titans,” said Tara Milburn, a branding expert and the founder of Ethical Swag. “Leaders in the tech space — Apple, Dell, Amazon, Google — have pledged to reduce their carbon footprint. Amazon launched a $2 billion climate pledge this year, and Apple committed to going 100% carbon neutral by 2030. Patagonia, Target, and other retail giants are connecting with their consumers through initiatives that target the environment.” 

Read: Gen Z Feels Financially Unprepared for Adulthood — But Has Hope for the Future

It’s Not Just What They Buy — How They Buy Is Changing the Concept of Credit

The Bank of America study produced a startling revelation. When it comes to Gen Z’s preferred payment methods, credit cards don’t even make the top three.

“Perhaps the biggest way Gen Z’s economic views affect economic choices is in credit,” said Sam Greenspan, head of content at Demand.io. “The explosive growth of buy now, pay later services is largely credited to popularity amongst younger shoppers. Gen Z likes what buy now, pay later has to offer: zero-interest loans on specific products with essentially no credit checks and fairly forgiving repayment schedules. As a result, we are already seeing the very nature of the credit industry change. Members of Gen Z aren’t building credit scores, as very few of the buy now, pay later services report to the credit bureaus. As a result, we could see credit scores become less emphasized in the future as Gen Z is looking to purchase homes, cars, and other significant items.” 

The Financial Guide to Adulting: Real Money Advice From Older Generations

Gen Z Flexes Its Muscles Through Its Investments, Too

Every generation has invested to build wealth, but Gen Z has leveraged investing as an instrument for social change. 

“Early arrivers to ESG investing, one-third of millennials now invest solely in companies and funds that take environmental, social, and governance factors into account,” Milburn said. “Following closely behind, that number now stands at 19% for the Gen Z demographic.”

Gen Z is also the first generation in history to use investing as a tool of rebellion against the establishment. At the start of 2021, a baffled world watched as a group of mostly young, small-time investors organized on Reddit trounced hedge fund heavyweights when they successfully squeezed a Wall Street short on GameStop’s stock.

“Gen Z investors are active in online communities like Reddit and Discord to discuss investment among peers,” Gilliam said. “Gen Z investors are more likely to follow the investment advice of online influencers, like the army of traders behind Dave Portnoy.” 

More: Crypto and 5 Other Groundbreaking Investing Trends for Gen Z

The Creative Economy Is Gen Z’s Golden Goose

Arguably the most famous boxer in the world right now is Jake a Paul, a YouTube star turned pugilist/provocateur who digitally branded — and to be fair, fought — his way into combat sports superstardom. Paul is just one name on an endless list of Gen Zers who parlayed talent into a payday through creative social media branding.

“By far, the creative sector is the biggest recipient of Gen Z’s energy,” said Alina Clark, co-founder and marketing director of L.A.-based software development firm CocoDoc. “There is a creative bug among the Gen Zs, and it’s pushing the economy into a whole new different place. That’s why we have a whole new trunk of career options revolving around being creative and tech-savvy, something that we didn’t have twenty years back.”

She specifically mentioned novel new ideas like NFTs and even careers that are now fairly standard, like freelance content creation.

“For Gen Z, making money is not really about having a job, or starting a brick-and-mortar business,” Clark said. “It’s more about expression and art. This is why influencers, be they on Tik Tok or Instagram, are quickly becoming more revered than your conventional movie or pop stars.”

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About the Author

Andrew Lisa has been writing professionally since 2001. An award-winning writer, Andrew was formerly one of the youngest nationally distributed columnists for the largest newspaper syndicate in the country, the Gannett News Service. He worked as the business section editor for amNewYork, the most widely distributed newspaper in Manhattan, and worked as a copy editor for TheStreet.com, a financial publication in the heart of Wall Street's investment community in New York City.

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