4 Frugal Ways Millennials and Gen Z Are Building Wealth Correctly
Written by
Yaël Bizouati-Kennedy
Edited by
Nicholas Morine
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Despite many preconceptions about millennial and Gen Z Americans, they are apparently making smart choices with their money and prioritizing wealth building, according to new research.
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Indeed, affluent young adults in these generations are taking unique approaches to investing, according to a new Bank of America survey.
The survey found that more than two in five (43%) affluent young adults are the first in their families to invest — and 61% of young adults reported they invest to meet their financial goals. Meanwhile, millennials were more likely to say investing is a “grown-up thing to do” versus Gen Z respondents (24% compared to 19%), while Gen Zers were more likely to view investing as a way to get rich (34% compared to 28% of millennials polled).
Matt Gellene, head of consumer investments at Bank of America, said the differing viewpoint between millennials and members of Gen Z isn’t too surprising given their age difference.
“Millennials have become more focused on long-term investing goals for things like college for their children, or retirement. In five to 10 years, the Gen Z cohort will probably also start rethinking their investing goals as their life priorities also evolve and mature,” added Gellene.
In addition, while 85% of young adults have adapted their investment strategies due to the current economic climate, they are split on how to manage it. About 45% said they are being more conservative, while 41% said they are being more aggressive to take advantage of the market.
Identifying Their Goals
According to Gellene, no matter what your current income or budget is, there are many ways young adults can start building their wealth.
“A crucial first step on the path to building wealth is to identify your financial goals,” he said. “Ask yourself, ‘What are my top financial priorities? What is my ideal timeline? Is this goal realistic?’ Starting with these questions will help you build out an actionable plan to begin achieving these goals, including how much you want to invest.”
Millennials are primarily focused on saving for retirement (50% of those polled said so), while Gen Z adults are prioritizing saving for big purchases, such as buying a home (32%), according to the survey.
Starting To Invest Soon
According to the Bank of America survey, both millennials and zoomers say their top investing regret is that they didn’t start sooner, and this sentiment increases with age: A full 53% of millennials said as much compared with 45% of Gen Zers polled.
“By not prioritizing your investments, you lose out on the power of compound interest, which could leave you with less money in the end,” said Gellene. “You don’t need to have a lump sum of money to begin building your investing journey — a few hundred dollars is plenty to get you started.”
Making and Sticking to a Budget
When reviewing your budget, there are many expenses you need to account for such as rent, utilities, car payments, student loan payments and groceries.
And what is left over is usually all discretionary spending money — whether it be for traveling, attending concerts or buying small treats for yourself.
By prioritizing your savings and investments, you can be more in control of your finances, Gellene added. Treating savings as a “bill to yourself” to help accelerate your long-term savings gives you more of a financial cushion for your future, he concluded.
“The good news is young adults are starting to build their financial knowledge earlier and are taking more informed approaches when it comes to investing,” he said, adding that 62% of Gen Z survey respondents reported they first learned about investing in middle or high school.
“This early education and curiosity will help them as they continue to build wealth,” he said.
Being Wary of Advice Posted on Social Media
Contrary to popular belief, the survey also found that half of young adults (52%) consider social media to be the worst source of financial advice.
In fact, 32% of millennials are more likely to get information from online investing services/research tools, while 31% of Gen Zers prefer advice from family and friends.
“It was a bit surprising to see that social media was considered the worst source of financial advice among young adults,” said Gellene. “It is promising to see that both millennials and Gen Z are resorting to more reliable sources for financial guidance to help them manage their money.”
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