Gen Z = Most savvy investors ever?!

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Welcome to another issue of Passionate Income.

Today, we’ll be discussing why - despite their young age - Gen Zers are shaping up to be the most financially literate (and financially responsible) generation in modern history.

Let’s dive in.

Speak with a group of Boomers, Gen Xers or Millennials about Gen Zers and you’ll most likely hear the same complaints:

1. They lack social skills

2. They hang out on TikTok all day

3. They all have blue and purple hair

4. They’re entitled / don’t want to work

But when you dive deeper, the statistics paint a different story. Especially as it relates to their incomes, financial literacy and long-term mindset.

According to a brand-new article on Business Insider, Gen Zers are potentially the most literate and well-prepared when it comes to retirement planning. Here are just a handful of ways they’re preparing in spite of their youth.

#1 - They Started Investing Young

According to a 2023 survey from the Certified Financial Advisor Institute, the number of Gen Zers who’ve started investing is anywhere from 250% to 600% higher than previous generations.

In particular, the survey showed 82% of Gen Zers started investing before age 21, while only 31% of millennials and 14% of Gen Xers started that young.

And of the 82% who are invested, almost 90% are making trades in response to economic factors like inflation and rising interest rates.

Admittedly, its unclear how well their “investments” are performing and how much they have invested. Either way, they’re ahead of previous generations.

#2 - They’re Saving More

As a result of seeing their Gen X (and in some cases young millennial) parents struggle with money, Gen Zers appear to be much more cognizant of just how hard it can be to retire relative to previous generations.

According to the the TransAmerica Center for Retirement Studies shows 2/3 of Gen Z survey respondents have begun planning for retirement. The crazy part?

Gen Zers are stashing away a full 20% of their income, which is more than double relative to previous generations. The caveat?

Many of them live at home, making it much easier to both save and invest.

Sadly, with both housing and rent at all-time highs - and mortgages rates higher than we’ve seen them in decades - its unlikely Gen Zers will be able to continue saving so much once they start paying rents and mortgages.

#3 - They’re Self-Guided

From company-appointed 401K plans to “stock brokers,” most Gen Zers’ parents made investment decisions with the help of a some kind of professional. Sure, a handful of rebels would manage their own accounts or day trade, but they were few and far between.

On the flip side, most Gen Zers have zero interest in working with professional Financial Advisors. Instead, they self-educate using platforms like YouTube and Podcasts (sending chills up the spines of Boomer wealth managers).

And when they want to make an investment, they also do it themselves using apps like Robinhood and Coinbase. Why?

Because unlike millennials, who didn’t get access to smart devices until they were in their 20s, Gen Zers grew up using their parents iPhones, tablets, etc.

And because of their, they’re plugged in. They feel safe online.

With that said, there’s a difference between managing a $5,000 portfolio and a $500,000 one. As Gen Zers go from having 4 to 5 to 6-figure portfolios, it will be interesting to see what percentage of them opt to work with a professional.

#4 - They’re Driven by FOMO

In general, making investment decisions based on emotion is a recipe for disaster. And in many cases, the same has proven true for Gen Zers. But there’s both an upside and a downside to “social media investing.”

One example of a negative is that - according to the UK Royal Mint - 64% of Gen Zers have fallen victim to some kind of “get rich quick” investing scheme.

Along the same lines, 50% have made investment decisions driven by FOMO. Same goes for the half who confess they want to make “quick” financial gains through “short-term” investments.

The good news?

While the above statistics show immaturity and a “quick riches” mentality when it comes to investing, it’s better for someone to make those mistakes and learn their lessons at a young age (versus in their 40s or 50s).

💡 Takeaway: On one hand, Gen Z investors have small portfolio balances (given their young age) and make high risk, high reward investments.

On the other, the fact Gen Zers understand the importance of investing - and are saving / investing at such a young age - bodes well for their financial future.

I'll leave you with this quote…

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