Gen Z is radically different from previous generations. This is a generation that seems more financially conscientious than its previous counterparts. It’s highly tech savvy and time-rich. And it’s already infiltrating the workforce; by 2025, Gen Z-ers will account for 27% of the global working population and start landing positions of leadership. They’re already savers from a young age – here’s how they can continue this positive trend, to get retirement right.
Gen Z: Super savers from day one?
The 2022 BlackRock Retirement Survey suggests that Gen Z is already saving more money than previous generations. Many Gen-Z-ers will have grown up in the claustrophobic climate of the 2008 financial crisis, and, more recently, the financial fall-out of Covid-19. These experiences could well have shaped their cautious money habits, motivating young employees to establish an emergency fund and start contributing to long-term savings goals like retirement.
In fact, the Sanlam Umbrella Fund data shows that a large number of 25 to 34-year-olds are choosing to make additional contributions of up to 5% of their salaries towards retirement. There could be myriad factors contributing to this, including the financial industry’s ongoing activism to encourage South Africans to save.
Born between 1997 and 2010, Gen Z is the first generation that’ll grow up with no recollection of the world without the internet. At ease with collating vast reams of real-time information, they’re true digital natives. This may mean they’re more comfortable with upskilling themselves through online financial education. One study found that 58% of the one thousand 18-24-year-olds surveyed use TikTok for personal finance advice and decision-making. This may also be contributing to their early savings habits.
How Gen Z can continue to save successfully:
There are forecasts from the Zurich Insurance Group that Gen Z-ers may change jobs up to ten times, between the ages of 18 and 34 alone. This has big implications for their retirement savings, especially with the Two Pot system almost in play.
Preserve: It’s imperative that Gen Z-ers appreciate the need to preserve their retirement savings when switching jobs, if possible. They need to understand the magic of compound interest and the ‘cost’ of ‘cashing’ out early and potentially never being able to catch up.
Reach out: As well as social media, this generation should also consider reaching out to financial advisors to put a roadmap in place to reach their retirement- and other saving goals. TikTok can cover the basics, but an adviser is invaluable to cover all the complexity of financial planning and get the foundations in place. The Sanlam Umbrella Fund not only provides access to Retirement Benefit Counsellors, but also gives members access to financial advisors free of charge. This is part of our suite of value-added benefits designed to empower our members to make confident financial decisions. Gen Z-ers should also take full advantage of employee offerings and value-added benefits, such as those available through their retirement funds. Consider contacting a retirement benefits counsellor to unpack what’s available. In ‘big life moments’ like retrenchments, moving out of home, moving in with a partner or buying a car, it’s also helpful to have an accredited financial advisor to discuss the implications of every decision.
Align investments with values: Gen Z is extremely values-driven. McKinsey calls this generation ‘True Gen’, defining it by its indomitable search for truth. Gen Z-ers want their money to make a difference. They want their investments to yield robust returns and strong social impact. To ‘stay the investment course’, Gen Z investors should consider ways to diversify their investments to further the causes they care about.
Gen Z is South Africa’s hope for the future. These young people have shown strong signs of building a life of financial confidence early on. Now, they need to continue these positive savings habits, to change the narrative of the nation’s poor retirement outcomes.
This article was first published by News24. This post and content is written by Anna Siwiak and sponsored and produced by Sanlam Corporate.