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The 3 forces driving
Gen Z’s financial behaviors

It seems like just yesterday everyone was talking about millennials, and their predilection for “killing” everything from diamonds to napkins. Now however, the tune has changed. The average millennial is in their mid-30s. There’s a new exciting demographic in town: Gen-Z, colloquially known as zoomers. And much like their predecessors, they have plenty of strange new habits for analysts and marketers to unpack.

The financial habits of the zoomers are especially interesting to unpack. These habits follow many trends that started with millennials, but they have reached a zenith under the “smartphone generation” (or whatever label you choose to apply to the zoomers.) There are plenty of financial activities and behaviors that were totally normal for Gen-Xer parents and boomer grandparents – and even millennial older siblings – that Gen-Z is eschewing entirely. According to a survey by Nerdwallet and The Harris Poll, 48% of Gen-Z has never signed a check; 44% have never applied for a credit card; and a whopping 72% have not yet begun saving for retirement. 

Now plenty of these statistics, of course, are due to the relatively young age of zoomers compared to other generations (the oldest amongst them are only 24, after all). Still, the peculiarities of Gen-Z should not be ignored. Not only are their activities different from their predecessors, but their attitudes toward finances may be as well. Studies show that Gen-Z is more thrifty than many older Americans, but also that they are more willing to invest in experiences. They also engage with brands differently, expecting “authenticity” and shared values from the companies that sell them products. All of these contribute to a complex and unique portrait of the average zoomer consumer.

Why does this matter, though? Aren’t Gen-Z a relatively small portion of the economy, with significantly less buying power than older consumers? Not so fast. Gen Z already makes up roughly 40 percent of global consumers. By 2030 that number is expected to increase to 48 percent, as more of Gen Z enters the workforce

And as their parents and grandparents get older, millions of zoomers are poised to become beneficiaries of the largest generational wealth transfer in American history.If banks and others in the financial services industry don’t act quickly, they may risk losing out on the business and brand loyalty of an entire generation.

With all that in mind, we’ve laid out a few key insights to help understand the attitudes of the average zoomer towards their finances. What have been the formative experiences of Gen-Z, and how has it shaped their approach to their pocket money?

We’ve covered a few of these trends before – in articles about Gen-Z investing habits and the rise of Buy Now, Pay Later, for example – and hopefully this latest deep dive will help paint a clearer picture of the elusive zoomers and how best to reach out to them.

In the Shadow of ‘08

During the housing crisis and subsequent recession of 2008, while millennials were entering college and the workforce in an era of uncertainty, the average zoomer was still just in grade school. Some commentators initially claimed that this distance would make Gen-Z less cautious about money than the slightly older millennials. Stepping into the roaring Obama-era economy, so the conventional wisdom went, the zoomers were poised to be the big spenders that the millennials never got the chance to be.

You’d think that these calculations would only change in 2020, when the twin blights of COVID-19 and its accompanying economic downturn seriously altered economic prospects for all Americans. But even before this, there were signs that Gen-Z’s attitude towards money had been shaped by the turbulent financial events of the last decade. Similar to millennials, the zoomers have a less positive view of capitalism and more positive view of socialism than older Americans. Less dramatic than a demand for societal overhaul, however, are the subtle, psychological effects of seeing family members struggle during the great recession. Jason Dorsey, author of Zconomy, claims that zoomers have been more financially cautious than millennials even before COVID hit. “This is the generation that saw their parents lose their houses or lose their jobs, and they witnessed that at a critical time,” Dorsey states. Research done by Vanguard, too, shows that COVID has forced Gen-Z to even more closely monitor their finances – more so than any other generation surveyed.

The effects of the recession on Gen-Z’s financial attitudes should be considered with nuance; there is, after all, evidence to show that it is millennials who were the most effected by the events of 2008. But the crisis may have had a more fundamental effect on the younger zoomers, causing them to develop more financially frugal habits, and take a more pragmatic view of money. Especially now that Gen-Z is facing another economic downturn just as they are entering the workforce, financial brands would do well to reach out with retirement planning and investment advice, emphasizing all the ways that zoomers can save and better protect themselves from future crises.

Social (and Financial?) Butterflies

Easily the biggest news story in the last year related to Gen-Z and finance was the Gamestop short squeeze affair. You know the story well by now, a mix of trolling, memes, and overinflated market values that seems straight out of Elon Musk’s fever dream. But as fun as it is to gawk at the chaos wreaked by some bored, ballsy Redditors, the truth is that social media is a major motivating force for Gen-Z’s financial decision making. 49% of Gen-Z cites social apps as their primary influence for financial decisions, over family, friends, or even personal experiences. In addition, 30% have consulted Reddit to make financial decisions. Clearly, the Gamestop affair was no isolated incident.

Some brands may see these numbers, and reason that the best way to reach zoomers is to advertise directly to them on social media platforms like Youtube, Reddit, and Instagram. Well, yes and no. While there is no doubt that leveraging social media is a must for any brand hoping to reach zoomers, it may not be as simple as buying ads. Gen-Z expects “authenticity” from brands, a particularly elusive quality that is difficult to define and impossible to fake. With a high degree of technological literacy, zoomers will see through manipulative ad campaigns; they are far more attracted to genuinely useful information that brands can offer them, especially if it is seen as popular among their peers.

One approach that some financial brands have seen success with is the power of influencer marketing. Data from Logica shows that 88% of zoomers are following social media influencers, providing an outreach channel that is potential highly lucrative. For example, Step – the no-fee digital bank for teenagers – has partnered with popular Tiktok influencers to reach out directly to Gen-Z with voices they already trust. By partnering with social media personalities with follower counts in the tens of millions, as well as by launching a teen-focused brand ambassador program, Step shows how innovative social media campaigns can be used to attract Gen-Z consumers, while avoiding the traditional advertising route.

Let’s Get Digital, Digital…

By now, Gen-Z is probably just as tired of hearing cracks about being glued to their smartphones as their grandparents are about hearing “Okay, Boomer.” Cliche as it may be, however, the numbers don’t lie: zoomers spend an average of 4 hours and 15 minutes on their phone every day, with 64% saying they are “constantly connected” online. As the first true “digital natives,” Gen-Z’s smartphone usage extends into every corner of their life. Financial activities and decision making, of course, are no exception.

One of the most obvious ways that phones enter into the equation is through the rise of mobile payments, which are an increasingly popular option for both millennials and zoomers. Thanks to the convenience, speed, and relative security, 40% of zoomers report using payment apps such as Venmo, with 15% using them regularly. Payment apps are not the complete picture, however. Mobile banking, budgeting apps, and even investing apps such as Robinhood are also extremely popular, with time spent on such apps more than doubling during the pandemic. There are many reasons for the popularity of such apps, but it is not hard to see that investing in mobile financial solutions is a strong channel to reach Gen-Z’s eyes – and their wallets.

No generation is a monolith, of course. Gen-Z is the most ethnically and racially diverse cohort of Americans in history, and one must not be too hasty to make generalizations. But in order to reach the zoomers, brands must pay attention to how their values and habits have been shaped by their lived experience. Growing up amidst the recession has taught them the importance of frugality and financial preparedness. Social media has opened them up to more perspectives than their parents ever had access to. And the proliferation of smartphones means that convenience and instant accessibility are non-negotiable. By taking all of these factors into account, banks and other financial brands can build stronger relationships with Gen-Z.

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