With Gen Z set to make up 40 percent of the population by 2020, financial institutions have set their sights on working with this generation to create lifelong customers. But this generation has unique values that financial service brands have been getting wrong. By better understanding what drives their opinion of money, brands can engage this group as partners for their financial future.
All too often in financial discussions, Gen Z and millennials are lumped together as “young people.” However, Gen Z has unique attributes and values when it comes to money; Gen Z grew up watching their parents endure the 2008 recession. They’ve witnessed the generation before them struggle to find jobs out of college and become saddled with student debt. And they’ve seen the explicit benefits, and downsides, of hustling and carving your own career path.
They are pragmatic savers, not frivolous spenders, and are more fiscally aware than the stereotypical 16 year old. Our research shows that young teens are already thinking seriously about their finances as they look to an uncertain future. In fact, money is a top stressor. At the same time, they will have enormous power and influence in that future as Gen Z will be 40 percent of the population by 2020. Just as they’re preparing for their financial future, so should companies prepare for Gen Z’s coming consumer primacy.
Here’s what you need to know about young people and money.
Digital first, but don’t discount IRL.
Yeah yeah, we know Gen Z has never known a world without immersive and pervasive technology. Great products, user-friendly apps, and advanced digital capabilities are a no-brainer. Forty-eight percent have a money or payment app on their phone, embrace Venmo, Square, and ApplePay and expect FinTech to continue to innovate and augment banking services. However, almost half of Gen Z say they still prefer to do their banking in a brick & mortar branch, so don’t give up on providing face-to-face access just yet.
Smart financial institutions will marry it all together: innovative, brilliant products that seamlessly fit into Gen Z’s pace of life, while also offering IRL experiences that are different from the status quo. Capital One gets this with its welcoming and accessible Cafésthat tap into the desire for community (you don’t even need to be a banking member to enjoy!) and feel more like your local coffee shop than a boring and cold bank. Gen Z values experiences—and this is no different when it comes to money.
Purpose is more than a buzzword, even when it comes to banking.
Young people today don’t just hopeto see social responsibility from the companies they give their money to – they demand it. Seventy-eight percent of consumers ages 13-25 are more likely to buy a product or service from a company that gives back to society.1 In fact, Mightyis banking (get it?)on just that. This platform reminds consumers of the social impact even their banked money can have and helps them find a bank that shares their values by showing which financial institutions are creating the most social impact.
Young people also want to do well and do good, and want financial institutions that help them achieve this.They take an idealistic approach to investing—in fact, 88 percent said they only want to invest in companies that share their values, compared to 79 percent of millennials, 77 percent of Gen Xers and 69 percent of baby boomers2 — but still want to make sure they are earning money on their investment. Aspiration,a new financial institution that offers socially-conscious banking and investment services, makes it easy to identify what your purchases support with itsNice Listand has brought transparency and accessibility tosustainable investing.
They’re optimistic about the future (and they’re saving for it).
A surveyby Lincoln Financial Group of 400 young people ages 15 to 19 found that they are optimistic about their financial future. This may be due, in part, to the fact that they are saving far earlier than older generations: 60 percent of them already have savings accounts and 71 percent say they are focused on saving for the future. Their top three priorities are getting a job, finishing college and safeguarding money for the years to come. They rate these goals above spending time with friends and family, working out, or traveling.
Financial institutions that add value to Gen Z by making saving and investing simple will win the day. While gamification can be a powerful tool for behavior change in young people, your program doesn’t have to be “fun” to be accessible for Gen Z. Just look at Acorns. This fintech brand understands that the easiest way to get more young people to save is to simply attach it to what they’re already doing and make the process so seamless that users don’t even notice.
Hustlers by nature, they are already ahead of you.
Lastly, don’t treat them like kids, empower them. Seventy-two percent of high school students want to start a business someday, and 61 percent of them would prefer to work for themselves versus an employer. This isn’t lip service, they’re already doing it: 76 percent earn their own money through part time work. Moziah Bridges launched a successful bow tie collectionat nine. At just 11 years old, Mikaila Ulmer landed an $11 million deal with Whole Foods to sell herlemonade brand.And Rachel Zietz became a self-made millionaire by 15 through her hugely successful online sportswear company,Gladiator Lacrosse.
The reality is, financial institutions are failing young people by skimming over this fact. Despite pouring millions of dollars into well-intentioned financial literacy programs, young Americans are still woefully ignorant about finances. A ton of info out there is pretty condescending and hasn’t caught up with how to effectively reach Gen Z. Young people want to gain financial confidence, yet the lens through which this education is delivered is often one of shaming them or telling them what to do versus empowering and inspiring them.
UK-based not-for-profit MyBnkempowers young people to take control of their financial future by tapping into their aspirations. They equip young people with the knowledge and skills to do things like run their own online and onsite bank at their school, or design and present ideas for their own enterprises to compete for interest-free micro-loans (under $100). These programs help build both capability andconfidence.
Financial institutions must adapt their strategies to both connect with and meaningfully engage Gen Z by better understanding how their products and services can add value and fit more seamlessly into how they live their lives and see their future.
Meredith Ferguson is the Managing Director of DoSomething Strategic
- New Compliance Training Product Developed for Financial Service Leaders
- How Creativity Plays a Role in Digital Transformation
- The AI Disconnect in the Financial Services Industry
- The Need for Whistleblowers in AML Enforcement
- Online Banking Experience the Key to Consumer Satisfaction, Claims New Survey