8 Personal Finance Tips for Gen Z From Millennials
Gen Z has come into the world of “adulting” at a difficult time. We’re still rising out of a global pandemic, banks are collapsing, layoffs run rampant and the economy could be on the brink of a recession.
Though millennials can’t relate to coming of age during a pandemic, they can relate to some of the other challenges Gen Z is going through. After all, millennials entered the workforce during the Great Recession and lived to tell the tale.
Generations are often pitted against one another, which is neither helpful nor very honest. In fact, most millennials want to see Gen Zers succeed and not have to endure the financial hardships that they faced. That’s why they’ve offered up the following finance tips targeted at this young but strong and smart generation.
Make a Budget and Stick to It
Creating a realistic budget that prioritizes needs over wants is important for everyone to do, and that includes Gen Z.
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“I know it might sound boring, but [budgeting] really is the foundation for financial success,” said Olle Lind, the founder and CEO of Buddy. “First, figure out how much money you’re bringing in each month, followed by how much you’d like to save each month, before then apportioning what’s left into how you’d like to spend it. Top tip: Budgeting apps are the easiest way to do this.
“After this, to build some motivation, set some specific goals that match your priorities, whether it’s saving for a trip, a house, a course or a family. Having a clear budgeting plan in place helps you stay on top of your finances, remain in control of your spending and set you up well for long-term, sustainable saving.”
Understand Compound Interest
One thing Gen Z might not know about — let alone fully grasp — is the concept of compound interest. This, in short, is the interest you earn on interest, and it’s the No. 1 thing that Lauren Keen Aumond, a millennial and the mind behind the personal finance blog and podcast “Adulting Is Easy,” has taught her Gen Z sister about.
“The most important part of personal finance is understanding the time value of money,” Aumond said. “The fact that $100 per month invested for 10 years at 8% is $18,000, while in 20 years it’s $60,000 and in 30 years it’s $150,000. Knowing this has encouraged my sister to start investing. She invested her graduation money in the stock market and adds $150 per month.”
Learn New Skills and Trades
You’re young and the world is your oyster. Get out there and learn as much as you can to build out your skills and get yourself set up for success in a promising career.
“Gen Z needs to prioritize learning and gaining experience that will aid them financially,” said Jonathan Merry, founder and CEO at Bankless Times. “This could involve going back to school, picking up a new trade or becoming an expert in a field that could one day lead to self-employment. If you want to set yourself up for long-term financial success, millennials advise searching out mentors and networking opportunities.”
Avoid the Vicious Cycle of Debt
Many millennials would do things differently if they could go back in time. That includes avoiding credit cards like the plague.
“I wish I had been told to live within my means and save up for big purchases instead of relying on credit,” said Bailey Schramm, finance advisor at BizReport. “While it may be tempting to take out loans for college, a car or other expenses, debt can be a slippery slope that can quickly spiral out of control if you’re not careful. High-interest credit card debt, in particular, can be extremely difficult to pay off, and it can take years to climb out of that hole.
“In addition to the financial stress that debt can cause, it can also impact your credit score, making it harder to get approved for loans or credit cards in the future. That’s why it’s so important to live within your means and avoid taking on more debt than you can handle. If you need to take out a loan or use a credit card, pay it off quickly and avoid falling into a cycle of debt.”
Diversify Investments From the Start
You should start investing right away — even $100 can get you started. It’s important to diversify your investments from the get-go.
“I would recommend Gen Z invest in ETFs and mutual funds,” said Marcus Arcabascio, the CFO of USA Credit Unions. “It is important to opt for low-risk investments. For this purpose, gold is an excellent investment option. The reason why this personal finance tip is so useful is that it reduces risk and makes it easier for people to manage their finances.”
Don’t Jump on Every Investment Trend
There’s always a hot new investing trend that’s taking people (and their money) by storm. Be wary and don’t hop on board an investing vehicle just because it’s all the rage right now.
“If there is one thing I could tell Gen Z about money, it would be to not jump on the bandwagon,” said Pete Chatfield, CEO at Household Money Saving. “Some people have made a lot of money off things like oceanfront real estate, NFTs and cryptocurrencies; yet, just because a certain asset class is popular now or has been for a long time does not guarantee that it will remain so in the future.”
Automate Your Savings — and Whatever Else You Can
Take the mental work out of saving by making it automatic.
“The biggest tip I have to stick to your financial resolutions or goals is to automate wherever possible so that you are not relying on willpower alone,” said Kendall Meade, CFP and financial planner for SoFi. “Automate your bill payments, savings and/or investments. People who struggle with spending, for example, may prefer to set up direct deposit so that a portion of their paycheck goes directly to savings, removing the temptation to spend the money instead.”
Don’t Delay Saving for Retirement
Melinda Jameson, founder of SuperWAHM, wishes she had listened to people who preached saving for retirement right away.
“To young ears, going through boring paperwork while choosing your plan will not sound very appealing,” Jameson said. “And it certainly isn’t urgent. But, in a decade or two already, you’ll thank your younger self for doing it. The longer you wait, the harder it becomes to make up for the money you should have invested in [your retirement].”
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