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Gen Z is getting an early start with investing — and experts say that's to their advantage.
Gen Z adults began investing and saving at age 19 on average, according to the 2024 Schwab Modern Wealth survey. This is significantly younger than baby boomers, who began investing at an average age of 35, and even millennials, who started at 25.
"One of the magical qualities of investing is the power of time and compounding and starting early and starting small," said Rob Williams, a certified financial planner and the managing director of financial planning at Charles Schwab. "Saving a dollar today and allowing it to grow and the earnings on that to compound over years increases significant wealth."
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Schwab surveyed 1,000 Americans, ages 21 to 75, in March. Gen Z includes people born between 1997 and 2012.
The financial benefit of starting to invest early
The time element is crucial for investing. A teenager opening a retirement savings account could end up with hundreds of thousands more dollars compared to someone who began saving in their 20s.
For example, say you put aside $5,000 a year each year until you retire at age 65, and earn an average annual return of 7%. An investor who starts at age 25 could end up with roughly $998,000, while someone who starts at age 19 — despite contributing only $30,000 more — might end up with more than $1.5 million. Delaying until 30 would yield about $691,000.
Experts suggest an easy way for young people to build wealth is by opening an individual retirement account that allows you to contribute after-tax dollars, also known as a Roth IRA. Roth IRAs offer tax-free growth, and the money can typically be withdrawn tax-free in retirement.
"Every young person, the minute they get their first job, should only be doing Roth IRAs if they qualify, or Roth 401(k)s," said Ed Slott, an IRA expert and certified public accountant. "Get the vehicle, the receptacle, the Roth IRA set up and it's more likely they'll make it a habit for the rest of their lives as they see their account grow."
Trust advisors, not TikTok
Much of Gen Z's confidence about investing comes from the growing accessibility of financial resources, according to the Schwab report. More than a quarter of Gen Z, 28%, say they learned about investing in school, compared with 19% of millennials and 12% of Gen X.
There's also a greater abundance of information available online and on social media that older generations did not have access to, especially at such early ages. However, experts recommend turning to a trusted financial advisor before taking advice from social media.
"There's a lot of information out there, but that does not equate to knowledge or context or sometimes the hype of certain parts of the markets that feel attractive, but may not be very good for your long-term investment health," Williams said. "It's like being attracted to an ice cream cone versus, you know, the more boring balanced diet, to build wealth over time."
Most Americans are swiping past the "finfluencer" content showing up on social media, the survey shows.
About three-quarters, or 76%, of Schwab survey respondents said they don't follow any finance influencers, and 65% reported that social media has no impact on their investments. Overall, respondents said they are more likely to engage with a financial advisor (57%) than social media platforms (42%) for financial advice.
Should people with student loans be investing?
A growing concern for many young people is student loans. In the second quarter of 2024, 6.8 million borrowers under 24 hold a total of $99 billion in federal student loan debt, U.S. Department of Education data shows. That number is even higher, at $490 billion, for the 14.8 million borrowers ages 25 to 34.
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However, experts say it shouldn't hold anyone back from investing.
"If anybody ever waited until they were debt free to do anything, they would never do anything," Slott said.
But balancing debt repayment and investing for future goals is important. Williams recommends people make the minimum payment on their loans and start small with retirement savings — even if that means putting aside just $100 a month.
As more payments are made and the student loan debt shrinks, he said, "you've already started to grow some retirement savings, and you'll have more from your budget, then, to commit."
FAQs
"One of the magical qualities of investing is the power of time and compounding and starting early and starting small," said Rob Williams, a certified financial planner and the managing director of financial planning at Charles Schwab .
Will Gen Z be the richest generation? ›
Gen Z — those born between 1997 and 2012 — will soon become the wealthiest generation ever, according to a recent report. The "Spend Z" report from NielsenIQ projects that Gen Z will have the fastest growth in spending power, reaching an estimated $12 trillion by 2030 and overtaking baby boomer spending by 2029.
What is the Gen Z approach to money? ›
1-in-5 of Gen Zers live with their parents to save money. Although Gen Zers are 12% less likely than older generations to invest in a 401(k), they are 11% more likely to invest in a Roth IRA. Gen Zers are 62% more likely than older generations to have no expectations of returns on their investments.
What are the best qualities of Generation Z? ›
Gen Z is known for their money-driven and ambitious mindset. They approach life pragmatically, demonstrating financial savvy and setting clear financial goals. They understand the importance of discipline in achieving success and are not averse to hard work and challenges.
What are Gen Z financial attitudes? ›
Gen Z's financial attitudes reflect deeper changes in how they view work, wealth and their place in the world. Their optimism about wealth creation, coupled with their confusion about financial matters, speaks to a generation shaped by economic uncertainty yet empowered by technology.
How are Gen Z becoming millionaires? ›
American Gen Zers, the oldest now entering their late 20s, have already accumulated substantial wealth through inheritance, investments, and entrepreneurship. Cerulli Associates estimates a seismic USD 84 trillion will transfer from baby boomer wealth in the USA to heirs, with Gen Z front and center.
What generation will inherit the most money? ›
“Much is often made in the media of millennial and Generation Z heirs but, in fact, Generation X will be first in line to inherit from their wealthy parents,” the report said. “Millennials and the younger Gen Z, for now, are more likely to receive sums as grandchildren, which will often be less substantial.”
Are Gen Z financially savvy? ›
For example, a new study by the Investment Company Institute (ICI) finds that “Gen Z households have nearly three times more assets in the [retirement] plan accounts (adjusted for inflation) that Gen X households did at the same age.” More Gen Z-ers have retirement plans set up and they've saved more in those accounts.
Who does Gen Z trust the most? ›
TikTok, Snapchat and Spotify top a list of brands Gen Z consumers trust most compared to all U.S. adults, according to a new report from decision intelligence company Morning Consult.
What do Gen Z call money? ›
Scrilla: Sometimes spelled “skrilla,” slang for cash or currency. Cheese: Similar to cheddar, refers to money as a means of survival. Guap: Especially popular among Gen Z and Gen Alpha, it's pronounced 'gwop' and it means a ridiculous amount of money, similar to “rack” or “milli.” 'Fanum tax'.
Gen Z is also the smartest and best educated generation. Having an unlimited wealth of information at our disposal has not gone to waste. In America, 57 percent of Gen Z is reported to have enrolled in a two-year or four-year college, compared to 52 percent of Millenials and 43 percent of Gen X.
What is Gen Z greatest strength? ›
“Gen Z's greatest strength is that they're more likely than other generations to challenge the status quo,” Granger says. “Those conversations and those experiences are where innovation and creativity happen.”
What does Gen Z value most? ›
Authenticity is the most important value for Gen Z — even beyond future plans and being rich.
How are Gen Z investing their money? ›
What funds does Gen Z care about? According to NASDAQ, 73% of Gen Z own stocks, “making them the most common type of investment for this generation.” The same survey found that 15% of the generation's investors are using ETFs, 30% hold bond investments and 22% buy index funds.
Which generation is the most financially stable? ›
For instance, baby boomers feel more financially responsible than other generations; Gen X is most likely to feel financially insecure; millennials have higher ownership rates of various retirement accounts; and Gen Z is the most comfortable talking to their friends and family about finances.
What are the top 3 things Gen Z spend their money on? ›
Major Spending Categories For Gen Z
Gen Z spending habits show they care the most about fashion, makeup and beauty products, technology, and their pets. This is perhaps due to their young age and few major bills.
Will Gen Z be the largest generation? ›
Generation Z
Generation X currently make up 23% of the global population. By 2035 they are projected to make up 20% of the population as Generation Alpha and Generation Beta are born. By 2035 they will also be the largest generation in the workforce at 31% (currently 27%). Globally there are almost 2 billion of them.
Are there any Gen Z billionaires? ›
The world's 8 richest young billionaires of 2024 – net worths, ranked: from Gen Z Ray-Ban heirs Clemente and Luca Del Vecchio to Red Bull's Mark Mateschitz and Met Gala regular Gustav Magnar Witzøe.
Which generation is the luckiest? ›
The Baby Boomer generation, those of us born between 1946 and 1964, are often hailed as one of the luckiest generations in history. Our lifetime has been marked by remarkable social, economic, and technological changes, contributing to an unparalleled quality of life.
Why Gen Z is a better generation? ›
Members of Gen Z are more racially and ethnically diverse than any previous generation, and they are on track to be the most well-educated generation yet. They are also digital natives who have little or no memory of the world as it existed before smartphones.
