Generation Z is the first generation of digital natives. This comes with access to vast amounts of information, the democratization of finance, and the ease of use of many financial apps, but it can also be a double-edged sword.
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The economic challenges facing this generation are enormous, and experts warn about ways to avoid some pitfalls.
Here are some.
Turn to Social Media for Financial Advice
A staggering 79% of Gen Zers say they get financial advice from social media, according to a Forbes Advisor survey. Although there are many legitimate “finfluencers”, you should always be wary of scams and advice from unqualified sources. In fact, research shows that only 31% of Gen Zers say they regularly check the experience and qualifications of people who provide financial advice on social media.
“Get advice from social media: Generation Z is often referred to as the ‘influencer generation,’ and many young Americans turn to social media for advice and guidance on everything from clothing to investments.” management advice and solutions at Edward Jones“Advice provided by social media influencers may be a useful first step, but it’s important to find a financial advisor who can tailor it to your specific situation.”
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Retirement savings wait ‘later’
Wealth management adviser Melissa Shaw said one of the biggest mistakes Gen Z is making is adopting a “later” attitude when it comes to retirement savings. TIAA.
“Whether Gen Z is focused on other financial priorities such as paying rent or mortgage, paying off student loans, raising children, or lacking access to an employer-sponsored retirement savings plan Whether or not they understand how it works, many Generation Z workers are missing out on matching contributions that may be provided through traditional employer-sponsored retirement plans. So you may be missing an opportunity to grow your savings faster,” says Shaw.
don’t stand up to debt
Many experts argue that to be financially prosperous, you should start living debt-free. But Gen Z is racking up debt faster than other generations. According to a Credit Karma study, Gen Z’s average debt increased to $16,283 in the fourth quarter of 2022, up 3% from the three months through May. This represents the largest increase in debt. And when interest rates spike, so do your balances.
On the other hand, falling into the credit card trap is a mistake, says Haas of Edward Jones.
“Credit cards can be a great way to build your credit history, if you make monthly payments,” Haas says. Generation Z needs to understand when and how they should use their cards.
overly conservative investment
Surprisingly, Generation Z Americans are more focused on saving than other generations, reporting the highest savings goals for 2023, according to a recent Wealth Watch survey conducted by New York Life. increase. According to the survey, Gen Z Americans are more likely than other generations to be concerned about job stability and layoffs in 2023 and the impact of housing market prices on their finances. tend to be financially conservative when it comes to investments.
But Ryan Victorin, vice president and financial consultant, said: Fidelity Investmentssaid that a common money mistake is to invest conservatively against long-term goals.
“Like retirement, time is on your side! Diversifying your portfolio between stocks, bonds and short-term investments can lower the risk level of your portfolio and increase the return for that level of risk.” says Viktorin. “The right investment mix is one that balances risk tolerance, investment horizon and financial position.”
IRA not considered
Another big mistake is not considering an IRA, especially for those who don’t have an employer-sponsored retirement plan. According to TIAA’s Shaw, Roth IRAs are best suited for young individuals with low taxes.
“You can save money, invest it, and grow it tax-free for the future,” says Shaw. “If you are a high-income Gen Z, a traditional IRA may help reduce your overall tax liability. Consider a self-employed IRA or a solo 401(k) if your income comes from non-traditional sources, such as getting your hair done or selling t-shirts, rather than a Roth or traditional IRA. You can save a lot of money.”
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