Generation Z

What Is Generation Z (Gen Z)?

Gen Z is the name given to the current generation of young people by many demographic researchers. According to the Pew Research Center, Generation Z consists of people born between 1997 and 2012. The oldest of this generation are reaching 25 years of age, with many now out of college, getting married, and starting families. They follow on the heels of the?millennials?(born between 1981 and 1996). As a result of the COVID-19 pandemic, members of Gen Z face a future more uncertain than many previous generations encountered.

• Generation Z (Gen Z) refers to the generation of Americans born from 1997 to 2012.
• The oldest members of Gen Z are starting their post-education years, with new careers and, possibly, families; the youngest are 10.?
• Though older Gen Zers have firm plans for retirement, they haven’t gone very far in starting their savings for it.

Understanding Gen Z

Gen Z is the most racially and ethnically diverse generation of Americans yet. According to the Pew Research Center, non-Hispanic White Gen Zers hold a very slim majority at 52%. Hispanics make up 25% of Gen Z, while Black Gen Zers make up 14%, and 6% are Asian. The remaining 5% are a different race or two or more races. The majority of Gen Z members are not immigrants: Only 6% were born outside the United States.

Though past generations have taken up social issues, Gen Z are more socially minded than previous generations. According to the Annie E. Casey Foundation, Gen Zers are focused on seven key social issues: healthcare, mental health, higher education, economic security, civic engagement, race equity, and the environment.

Many Gen Zers?will soon be ineligible to remain on their parents' health insurance, and they are concerned about how to pay for their own coverage. This issue is further exacerbated by the increase in the number of Gen Zers seeking mental health treatment—37%, according to the American Psychological Association.

Gen Zers also make education a priority. More than half (57%) of those ages 18 to 21 years old were enrolled at either a two- or four-year college. Gen Z members also are more likely to finish high school.

Members of Gen Z are fighting for social change, racial equity, and protecting the environment in record numbers. Some have elevated their profile to the national level, such as X (formerly Emma) González, a survivor of the 2018 Marjory Stoneman Douglas High School shooting, who helped organize the March for Our Lives movement with other survivors.

?According to the Pew Research Center, approximately 70% of Gen Zers think the government needs to take a more active stance in addressing problems.

Gen Z vs. Millennials, Gen X, and Baby Boomers

The 21st Annual Transamerica Retirement Survey of Workers looked at?how Gen Z views its finances?and retirement prospects compared with?millennials,?Gen Xers, and?baby boomers. Key findings include:

• Almost six in 10 Gen Z workers (59%) said their employment situation has been negatively impacted—primarily due to a reduction in work hours—as a result of the pandemic, which is significantly more than among millennials (51%), Gen Xers (39%), and baby boomers (30%).?
• Baby boomers, Gen Xers, and millennials are significantly more likely than Gen Zers to cite saving for retirement as a financial priority (75%, 65%, 53%, and 33%, respectively).?But they are, of course, a lot closer to it—or already there, in the case of many boomers.
• Building emergency savings is a priority?for 50% of Gen Xers, 46% of millennials, 42% of Gen Zers, and 36% of baby boomers.

Gen Z’s Financial Situation?

According to the Transamerica survey results, Gen Z currently has little to no financial security. Gen Z workers are more likely to say they are just getting by to cover basic living expenses (50%) and paying off student loans (35%) than older generations. In addition, they have saved just $2,000 in emergency savings, while 30% have dipped into their retirement accounts. Also, approximately one-third of Gen Zers have reduced their day-to-day expenses due to pandemic-related financial strain.

Retirement Savings?

Even though Gen Zers might be on shaky financial ground at the moment, they have firm plans for retirement. In fact, 70% are saving for retirement through?employer-sponsored plans, such as a?401(k)?or similar plan, and/or outside the workplace, per the Transamerica survey. Gen Zers also started saving for retirement at age 19, much earlier than millennials (age 25),?Gen Xers?(30), and baby boomers (35).?

According to the survey, Gen Z members estimate that they will need $500,000 by the time they retire to feel financially secure. However, only 32% have a backup plan if retirement comes unexpectedly.?

Additionally, the?2022 Investopedia Financial Literacy Survey?found that younger generations?are factoring cryptocurrency into their retirement plans, so understanding cryptocurrency may be extremely important for children.

Financial Planning for Gen Z

Because Gen Zers are just moving into the workforce, many don’t have a lot of experience with?financial planning. They may know about employer-sponsored plans, but many don’t know much about investment products outside of work, such as bank accounts (savings and?money market),?individual retirement accounts (IRAs), and?certificates of deposit (CDs). In fact, according to the Transamerica survey, only 9% have a “great deal” of understanding of?asset-allocation?principles as they relate to retirement investing.

Are Gen Zers Saving for Retirement?

Gen Zers are the most retirement-conscious generation ever. A staggering 70% have some sort of retirement plan, whether employer-sponsored or self-administered. Gen Zers started saving for their retirement at age 19. Compare that to millennials (age 25), Gen Xers (age 30), and baby boomers (age 35). Gen Zers anticipate needing to save $500,000 for retirement, however, which may prove to be an underestimate given that financial experts tend to?peg the number higher at as much as $2 million.