5 Dumbest Money Moves That Gen Z Can Make

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Gen Z is the first  generation of digital natives. And while this comes with access to tremendous amounts of information, a democratization of finance and the ease of use of a slew of financial apps, it can also  be a double-edged sword.

The financial challenges this generation face are legion, and experts are warning about how to avoid some of the pitfalls.

Here are just a few.

Relying On Social Media for Financial Advice

An eye-popping 79% of Gen Z say they get their financial advice from social media, according to a survey by Forbes Advisor. And while there are many legitimate “finfluencers,” one should always be wary of scams or advice stemming from unqualified sources. Indeed, a meager 31% of Gen Zers said they regularly check the experience and qualifications of people who supply financial advice on social media, according to the survey.

“Getting advice from social media: Gen Z is often referred to as the “influencer generation,” with many younger Americans turning to social media for advice and guidance from everything from clothing items to investing,” said Lena Haas, principal, head of wealth management advice and solutions at Edward Jones.  “While the advice social media influencers provide might be a helpful first step, it’s important to find a financial advisor who can tailor to your specific situation.”

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Waiting Until ‘Later’ To Save for Retirement

One of the biggest mistakes Gen Z can make is to take on the “later” attitude when it comes to saving for retirement, said Melissa Shaw, wealth management advisor, TIAA.

“Whether Gen Z is more focused on other financial priorities like rent or mortgage payments, student loan debt, child care — or they do not have access to a employer-sponsored retirement savings plan or they do not understand how the plans work — many Gen Z workers may be missing out on growing their savings faster, because they are missing out on any matching contributions that may be offered through a traditional employer-sponsored retirement plan,” said Shaw.

Not Tackling Debt

Many experts argue that to prosper financially, one should start by living debt-free — or as much debt-free as possible. Yet, Gen Z is racking up debt faster than other generations. According to a Credit Karma survey, Gen Z’s average debt increased to $16,283 in the last quarter of 2022, up 3% compared to the three months through May — representing the largest increase in debt. And with interest rates soaring, so do balances.

In turn, getting caught in the credit card trap is a mistake, said Edward Jones’ Haas.

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“Credit cards can be a great way to build a credit history — if they’re paid off each month,” said Haas. Gen Z needs to understand when and how the card should be used, or those late-night snack charges could easily pile up into massive debt.

Investing Too Conservatively

Surprisingly, Gen Z Americans are more savings-focused than other generations, reporting the highest 2023 savings goals, according to a recent Wealth Watch survey conducted by New York Life.  Gen Z Americans are more likely to be concerned about the impact of job security and layoffs, as well as housing market prices on their finances in 2023 than other generations, according to the survey. In turn, they tend to be more financially conservative when it comes to their investments.

However, Ryan Viktorin, vice president, financial consultant, Fidelity Investments, said that a common money mistake is investing too conservatively for long-term goals.

“Just like with retirement savings, time is on your side! Holding a diversified mix of stocks, bonds and short-term investments could reduce the level of risk in your portfolio and potentially boost returns for that level of risk,” said Viktorin.  “An appropriate investment mix is one that balances the considerations of risk tolerance, investment horizon and financial situation.”

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Not Considering an IRA

Another big mistake, especially for those without an employer-sponsored retirement plan, is not considering an IRA. Roth IRAs are great for younger individuals in lower tax brackets, according to TIAA’s Shaw.

“They allow you to save money, invest it and grow the money tax-free for the future,” said Shaw. “If you are a higher-income Gen Zer, then a traditional IRA may help lower your overall tax liability. If you have a small business, or earn income from a nontraditional source, like influencing or content creation, doing makeup or hair or selling t-shirts for example, consider a self-employed IRA or a solo 401(k) that will allow you to save more money than the Roth and traditional IRAs.”

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About the Author

Yaël Bizouati-Kennedy is a full-time financial journalist and has written for several publications, including Dow Jones, The Financial Times Group, Bloomberg and Business Insider. She also worked as a vice president/senior content writer for major NYC-based financial companies, including New York Life and MSCI. Yaël is now freelancing and most recently, she co-authored  the book “Blockchain for Medical Research: Accelerating Trust in Healthcare,” with Dr. Sean Manion. (CRC Press, April 2020) She holds two master’s degrees, including one in Journalism from New York University and one in Russian Studies from Université Toulouse-Jean Jaurès, France.
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