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Gen Z is rewriting the handbook on savings and investments

By Tony Mallam

For decades, most people who were able to save and invest left the details to their financial advisor. The more dedicated might have read the annual report detailing how their investments were doing or request that a greater allocation of their monthly savings go to a top-performing fund, but that was about it. Today, that’s completely changed.

Younger people, particularly those in the Gen Z cohort (and some Millennials) are increasingly using their technological knowledge to take control of their own savings and investment destinies. Moreover, they have a much bigger appetite for risk than their Gen X and Boomer counterparts and are far more willing to invest in new and innovative products and categories.

To put it more bluntly, they’re ripping up the savings and investment handbook and we would all do well to take note.

Busting out of the Boomer mentality

When it comes to understanding what it is that makes these younger investors so much braver and more willing to explore, there are a couple of factors worth looking at.

The first is that this is a generation of people who’ve grown up being able to do everything online. Their first experience of a bank probably wasn’t going into a physical branch, but having their parents set up an account that they’ve always been able to access digitally. Some may even have only ever used their bank’s smartphone app. The same is true for almost everything else in their lives, be it music, gaming, or communication. Why should their approach to investment and savings be any different?

It’s also worth noting that this is a generation that’s grown up with rapid change and innovation. In order to survive and thrive, they’ve had to rapidly adapt to new technologies and products. So, when an app comes around that lets them instantly trade shares, flip sneakers, or convert their digital pocket change into cryptocurrencies, they’re going to embrace it.

Finding savings in fintech

And the degree to which they have embraced these alternative investment vehicles is telling. For example, a 2021 survey found that around 16% of Americans have invested in cryptocurrencies. Among Gen Z and younger millennial investors, however, the ratio is almost twice as high at 31%.

While it’s hard to get a similar breakdown for African countries, chances are it’s the continent’s burgeoning, tech-savvy youth population who are driving its explosive cryptocurrency growth. And it really is explosive. Between 2020 and 2021, the continent saw a 1 200% increase in cryptocurrency payments, with some $105-billion worth of assets changing hands. Additionally, Kenya, South Africa, and Nigeria rank among the top 10 countries in the world in terms of cryptocurrency use.

That level of adoption presents a major opportunity, especially in countries with a poor savings culture. South Africa, for example, already had one of the lowest savings rates in the world prior to Covid-19 and the situation has only deteriorated since then.

By taking a tech-first approach, which allows people to take control of their savings and finances remotely via digital apps, building a savings culture becomes much easier. Even better is if those apps allow them to take a convenient “set and forget” approach that also allows them to save as they spend.

A gift from Gen Z

Ultimately, it’s important to remember that just because Gen Z investors are driving this approach to savings and investing, doesn’t mean they will be the only ones taking it. They may set the trend, but it will filter up. Think about the initial resistance to smartphones among older people. A decade ago, it would’ve been difficult to predict that everyone’s grandparents would have smartphones and be comfortable using WhatsApp, but today it’s almost a given.

So, while it’s never a bad idea having an experienced financial advisor at hand, anyone wanting to understand the future of savings and investments could do a lot worse than to look at what young people are doing.

Tony Mallam, Managing Director, upnup

This article was first published by IOL on the 13th June 2022. 

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