Gen Z are generally defined as people born between 1995 and 2010. The world is their oyster, but it’s also filled with challenges that earlier generations didn’t have to face. Competition is fierce, aggravated by evolving threats like climate change and the rapid adoption of AI, which the previous generations didn’t have to contend with. Deloitte’s recent study shows half of the Gen Zs (51%) globally are living paycheck to paycheck in 2023 — a figure that has increased by five percentage points year-over-year.
In GCC, about 54% of the total population is under 25. Their financial health has strong implications for the region’s economic prospects. While governmental policies, a robust economy, and a booming job market can create a supportive environment for Gen Z, they also need to be mindful of their individual financial well-being. Five ways in which “zoomers” can adapt and make smart choices are listed below:
1. Stay away from the next big thing
While we have access to more information and facts than ever before, we are exposed to more noise too. We have “finfluencers” on social media promoting products and services without checking their suitability to one’s needs. While some may be genuine, it could be difficult to separate facts from fiction for the average Gen Z. Many, to my knowledge, have fallen victim to such fads.
One wrong move or a momentary lapse in judgment can leave a dent in investment portfolios, eroding a significant amount of capital. Such setbacks, in turn, impact the investment psyche, making you sceptical of certain asset classes and financial advisors. If something sounds too good to be true, it probably is. It is important to invest, but do it without greed, take some professional advice, and always keep it simple.
2. Spend mindfully
They say the art is not in making money but keeping it. And wealth preservation will not happen without any planning. We are living in the peak of consumerism today. Brands are constantly striving for more share of the pie. Take Apple iPhone, for example — it boggles my mind that people line up for days before the launch of the latest model that actually does not have a limited supply. You can easily get it in a week or a month.
Spend your money intentionally. If the new iPhone makes you happy, go for it every year. But cut back on things you don’t care about. I have a friend who eats only to satisfy hunger and has no particular affinity for different cuisines. She rarely goes out to eat, but loves travelling and discovering new places, so spends her money on that. Don’t spend to keep up with your friends or colleagues; it will rarely make you happy in the long run. If you spend mindfully, you will be happier because you will have more of what you care about along with financial security.
3. Be prepared
We all have plans in life, and Gen Z is no different. Their plans are often grander, with a clear vision of what they want to achieve. I admire them for this. But, in all honesty, plans don’t always work. So, I always advise them to be nimble and ready to pivot if things don’t go to plan.
Life, if nothing else, is unpredictable. So, if you have a career path set in your mind, and, for some reason, it doesn’t go to plan, you should be ready to make the best of the next best opportunity. The same applies when it comes to finances. No matter how much we plan, sometimes life has its own plans. To whatever extent you can, prepare for these eventualities. Insurance is an excellent tool to hedge against unforeseen events — as is an emergency fund. It is advisable to avoid making any big investments before securing the rainy-day fund.
4. Don’t waste time
Time is the biggest factor impacting investment returns. So, don’t wait for the right time to start investing. The only truth is that the earlier you start investing, the better your returns will be in the long run. There is no minimum amount of money that one needs to start investing. Even if it is $100 a month, do it. Another easy way to do so is to benchmark it to an expense you incur every month. Say you spend $100 on entertainment — invest the equivalent amount. When your lifestyle improves and spending goes up, so will your investments.
Perhaps it is best to automate monthly investments, thereby ensuring consistency. Irrespective of how big or small the investment is, the power of compounding means you will end up with a sizeable corpus someday when you need it the most. Consistency is key, like going to the gym every day versus going once in a while — we know which one will lead to a better outcome.
5. Invest in yourself
Buying fancy things rarely brings you admiration from your peers. Instead, invest in yourself. Make yourself a better, smarter person whom people can turn to for genuine advice. There is no better way to live your life than to strive for constant improvement and be the best version of yourself. Use your wealth and time to grow, be it professionally or at a personal level. The returns from these efforts far outweigh the benefits of any physical object you can ever buy.
Abhishek Datta is associate vice president, The Continental Group
For more stories on finance, click here