Gen Z and millennials are a unique and fast-growing group of investors. Unlike previous generations, they have led an investment revolution by embracing new digital investment services. This has translated into a preference for online investment tools, mobile applications, and digital platforms for access to financial markets, which has helped to break the traditional barriers to entry in the world of investing.
In this issue, we will take a closer look at the following trends:
The Gen Z investment mindset: Early starters
Gen Z often starts saving and investing younger than previous generations. A FINRA Foundation and CFA Institute study, Gen Z and Investing looked at Gen Z consumers (18-25) and explored their financial attitudes and behaviors. The key finding is that despite their young age, a surprisingly large percentage of Gen Zs in the United States invest.
“Close to six in ten, (56 percent) of U.S. Gen Zs ages 18 to 25 report owning at least some investments. Two in ten (19 percent) are currently invested in cryptocurrency and/or non-fungible tokens (NFTs) only.”
Even more impressive, 25% of U.S. Gen Z investors began investing before they were 18.
Entrepreneurial spirit
Gen Z has shown an early passion for entrepreneurship and self-employment. Many Gen Zs are open to exploring alternative income streams, such as freelance work or starting their businesses. This makes them open to exploring financial education like learning about budgeting for startups, managing business finances, or understanding how gigs work.
Work-life balance
Gen Z is increasingly concerned with achieving a work-life balance, which is why they prioritize flexibility in their career choices, alongside financial freedom. That explains why there is a need for financial education that emphasizes the importance of balancing financial goals with personal fulfillment while maintaining a healthy relationship with money.
Embracing technology
Gen Z is more likely to embrace robo-advisors, online trading platforms, and cryptocurrency. They see technology as a tool to democratize finance and make investing more accessible to everyone.
According to the CFA Institute report, 65% of Gen Z investors said they used investing apps to trade, while only 55% of millennials and 38% of Gen X investors said they used apps. Online tools lower the barrier to entry for many Gen Z investors and stand in stark contrast to complicated customer service offered by traditional financial advisors.
An investing app's most important aspects for younger generations are ease of use, simple UI, and low brokerage costs.
Micro-investing
Apart from the ease-of-use aspect, many investment apps targeting Gen Z encourage small-size investments to ensure his lifestyle is not affected by how much he decides to invest.
Micro-investing or simply investing small amounts aligns perfectly with Gen Z's desire for accessibility and inclusivity, enabling them to start investing with minimal capital. Many investing apps propose to begin with as little as $50 and make it a habit to make weekly or monthly contributions to investment accounts.
Gen Z and financial literacy
Investment apps tailored for Generation Z focus on shaping financial literacy and education among young adults. These platforms integrate educational features designed to empower users with essential financial knowledge.
Bloom and similar investment apps recognize the importance of accessibility and provide easy-to-understand educational resources within the app interface, including articles, tutorials, videos, and podcasts.
Investment apps incorporate interactive learning tools like quizzes, simulations, gamification, and reward programs to engage Gen Z users effectively.
The rise of #FinTok
48% of Gen Z investors said they were getting financial advice from social media — and, according to the CFA report, these platforms are the "top information source" for young investors in the US, Canada, and the UK.
Sources of information Gen Zs Use to learn about investing and financial topics
Today, 58% of Gen Zers are consuming financial knowledge on TikTok. Just enter the world of #FinTok — Finance TikTok — where creators teach young people how to manage their money and increase their earnings.
The platform’s bite-sized videos make it easy for users to consume and understand complex financial concepts quickly, making personal finance information accessible to all. Unfortunately, most public schools don't teach personal finances and financial literacy.
“FinTok democratizes finance knowledge by breaking down tricky financial jargon and difficult concepts, such as investments and equity, in easy-to-understand explainer-style videos.”
Unsurprisingly, FinTok’s popularity has skyrocketed amongst Gen Z users in the last few years:
Like any topic on any platform, #FinTok has its most influential content creators, known as ‘Finfluencers’. For example, Californian Stephen Chen, a former math teacher turned ‘financial freedom coach’ has more than 1M followers on his TikTok channel @CallToLeap, where he posts content on investing options and trading tips for teens.
Another important note is a large number of #PersonalFinance creators are female, because according to a survey by Fidelity, 55% of women prefer to learn about money from other women. Creators on TikTok and Instagram share financial advice for women, encouraging women to own their personal finance journeys.
Passion investing and socially responsible investing (SRI)
Gen Zers view wealth differently than older generations and will sacrifice returns to invest in causes they believe in. “Passion investing” reflects their desire for more personalized and emotionally fulfilling investment opportunities, in areas they are passionate about, such as art, collectibles, sports, fashion, or renewable energy.
For example, Stargaze app allows you to invest in what matters with more than 80 expert-curated stock collections.
Another example is Alinea Invest, a fintech app offering AI-powered wealth management aimed at Gen Z women. The app proposes users create “playlists”, like curating music on Spotify, around themes like female leadership, fashion, and abortion rights.
Gen Z also wants their money to align with their values, investing in companies that prioritize sustainability, diversity, and social justice. According to a 2022 survey by Morgan Stanley, 90% of Gen Z investors said that SRI is important to them, and 85% said that they would be willing to sacrifice some of their returns to invest in companies that align with their values.
Conclusion
Gen Z is poised to reshape the future of investing. With their tech-savvy, entrepreneurial mindset, and desire for financial independence, they are challenging traditional norms and paving the way for a more inclusive and socially responsible financial landscape.
