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As economists predict a looming recession, a new Bankrate survey shows that Gen Z-ers may be the least prepared. While older Americans are preparing for the potential of a downturn, two in five people in Gen Z say they haven’t taken any steps to get their finances in order. Forty percent say they’re not at all prepared for a recession.
Unlike what some older adults say, Gen Zers are quite Financially Literate. They often try to improve their knowledge of budgeting, investment strategies, and debt management to make more informed decisions about their futures.
While Gen Z relies heavily on social media platforms to learn about finance, what they want is somebody with first-hand experience. A guide who can show them the ropes in debt management, budgeting, taxes, and investments– not just theoretical knowledge. So what is causing the disconnect?
There are Mixed Messages Everywhere
Many people from Gen Z say they don’t completely grasp how debt works, particularly credit cards and personal loans. Parents regularly avoid discussing borrowing options with their kids to prevent them from getting in over their heads. However, staying hidden from debt and what it signifies is not a good idea. Having some past debt to build up a credit score that’ll allow you to make sizable purchases is key.
Financial advisors can educate Gen Z individuals on responsible borrowing and recommend credit cards or loans that will help improve their credit score without putting them in debt. Furthermore, advisors know how to decipher loan paperwork and explain the terms and conditions, so borrowers know what they agree to.
Help With Lowering Monthly Expenses
With the current inflation rate, it’s no wonder that people are increasingly anxious about their finances.
To top it off, Gen Zers think their money matters are more convoluted than earlier generations’ due to rising costs and limited opportunities for professional development at big businesses. They might not be aware of this yet, but they need a financial advisor who can teach them how to curb expenses, so they make their money last longer.
An excellent place to start is by getting rid of anything that might tempt them and following a set budget. It could help to eliminate convenience apps, stop online shopping as much, and look at their monthly budget. See what things they can go without that aren’t necessities, like subscriptions, going out to eat, or traveling. Doing this could lower their monthly expenses significantly — often by hundreds of dollars per month.
By being mindful of their spending and strategic about taking on debt, Gen Zers can save money each month. The typical Gen Z college graduate has $10-20k in student loans, but refinancing at a lower interest rate or combining multiple balances into one payment could help reduce monthly expenses.
Some tried-and-true methods to lower monthly expenses, like ride-sharing or clipping coupons (or even digital coupons). These methods aren’t as exciting, but they can add up.
Get a Smart Investment Adviser
Since Gen Zers doubt that Social Security will be available to them by the time they retire, they are more proactive investors than older generations. This means that when choosing a financial advisor, they prioritize someone knowledgeable about different investment options and can help them make sound decisions for their future.
Financial advisors need to be knowledgeable about cryptocurrency, NFTs, and other investment trends if they want to target the Gen Z market. In addition, advisors will need to offer more unique options that appear appealing since this generation is less likely than others to invest in something they perceive as outdated or with little future value. Another thing to keep in mind about Gen Zers is that their investments must align with their personal beliefs and values.
Get the Most Out of Your Tax Return
Believe it or not, nearly half of all Gen Z individuals in the workforce are self-employed – but very few understand tax law. As a result, they often don’t take full advantage of available deductions, and this lack of knowledge can cost them thousands of dollars annually.
So, they’re not only looking for someone who knows what to do with their money. Gen Zers want a small business financial advisor who can help them look through their expenses and find ways to get the necessities as tax write-offs. The more an advisor can save them on taxes, the more they have left over to reinvest later.