What Is Generation Z (Gen Z)?
Generation Z was born between 1997 and 2012 after the Millennial generation and before Generation Alpha. The oldest of this generation are reaching their late 20s in 2024. Many of them are out of college, getting married, and starting families. The youngest may be as young as 12. They're commonly referred to as "Gen Z" or "Gen Zers."
Key Takeaways
- Generation Z (Gen Z) refers to the generation of Americans born from 1997 to 2012.
- Gen Z is bracketed between Millennials (born from 1981 to 1996) and Generation Alpha.
- The oldest members of Gen Z are starting their post-education years with careers and possibly families.
- The youngest Gen Zers are just 12 years old in 2024.
- Older Gen Zers have firm plans for retirement but they haven’t gone very far yet in starting their savings for it.
Understanding Gen Z
Gen Z is the most racially and ethnically diverse generation of Americans. Non-Hispanic White Gen Zers hold a very slim majority at 52%, according to the Pew Research Center. Hispanics make up 25% of Gen Z and Black Gen Zers make up 14%. Asians represent 6%. The remaining 5% are another race or two or more races. The majority of Gen Z members aren't immigrants. Only 6% were born outside the United States.
Past generations have taken up social issues but Gen Zers are more socially minded than previous generations. They're focused on seven key social issues, according to the Annie E. Casey Foundation: healthcare, mental health, higher education, economic security, civic engagement, race equity, and the environment.
Many Gen Zers will be ineligible to remain on their parents' health insurance and they're concerned about how to pay for their own coverage. This issue is further exacerbated by the increase in the number of Gen Zers seeking mental health treatment: 37%, according to the American Psychological Association.
Gen Zers also make education a priority. More than half (57%) of those ages 18 to 21 years old were enrolled at a two- or four-year college. Gen Z members are also more likely to finish high school.
Members of Gen Z are fighting for social change, racial equity, and protecting the environment in record numbers. Some have elevated their profile to the national level, such as X (formerly Emma) González, a survivor of the 2018 Marjory Stoneman Douglas High School shooting who helped organize the March for Our Lives movement with other survivors.
Approximately 70% of Gen Zers think the government should take a more active stance in addressing problems, according to the Pew Research Center.
Gen Z vs. Millennials, Gen X, and Baby Boomers
The 21st Annual Transamerica Retirement Survey of Workers looked at how Gen Z views its finances and retirement prospects compared with Millennials, Gen Xers, and Baby Boomers:
- Almost six in 10 Gen Z workers (59%) said their employment situation was negatively impacted as a result of the COVID-19 pandemic, primarily due to a reduction in work hours. This is more than Millennials (51%), Gen Xers (39%), and Baby Boomers (30%).
- Baby Boomers, Gen Xers, and millennials are significantly more likely than Gen Zers to cite saving for retirement as a financial priority (75%, 65%, 53%, and 33% respectively) but they're a lot closer to retirement or are already there in the case of many Boomers.
- Building emergency savings is a priority for 50% of Gen Xers, 46% of millennials, 42% of Gen Zers, and 36% of Baby Boomers.
33%
The percentage of Gen Zers who consider saving for retirement to be a financial priority.
Gen Z’s Financial Situation
Gen Z has little to no financial security, according to the Transamerica survey results. Gen Z workers are more likely to say they're just getting by to cover basic living expenses (50%) and paying off student loans (35%) than older generations.
They've also set aside just $2,000 in emergency savings and 30% have dipped into their retirement accounts. Approximately one-third of Gen Zers reduced their day-to-day expenses due to pandemic-related financial strain.
Retirement Savings
Gen Zers might be on shaky financial ground but they have firm retirement plans. Per the Transamerica survey, 70% are saving for retirement through employer-sponsored plans such as a 401(k) and/or outside the workplace. Gen Zers also started saving for retirement at age 19, much earlier than Millennials (age 25), Gen Xers (30), and Baby Boomers (35).
Gen Zers estimate that they'll need $500,000 by the time they retire to feel financially secure but only 32% have a backup plan if retirement should come unexpectedly early.
The 2022 Investopedia Financial Literacy Survey also found that younger generationsare factoring cryptocurrency into their retirement plans so understanding cryptocurrency may be extremely important for children.
Financial Planning
Many Gen Zers are just moving into the workforce so many don’t have a lot of experience with financial planning. They may know about employer-sponsored plans but many don’t know much about investment products outside of work such as bank accounts like savings and money market, individual retirement accounts (IRAs), and certificates of deposit (CDs).
Only 9% have a “great deal” of understanding of asset-allocation principles as they relate to retirement investing, according to the Transamerica survey.
You can take four steps to help you start down the road to a strong financial future if you're a Gen Z member.
$500,000
The amount that Gen Zers feel they need to save for a financially secure retirement.
1. Get a Comprehensive Financial Plan
Don’t wait until you're well into your career to seek advice for your financial future. Now is the time to seek input on how to maximize your savings if you have a steady job and you're already saving for retirement through an employer-sponsored plan.
Learn about budgeting. There are some great apps for that. Work toward building an emergency fund to help you through tough times and keep you from ending up with serious credit card debt if your car breaks down.
2. Manage Your Debt
Purchasing a home may still be some years away even for the oldest 27-year-old Gen Zers. It's not too soon to get your finances under control, however. A good credit rating and a low debt level will help your current life because hiring managers sometimes check this and your future ability to get everything from a car loan to a mortgage as well.
Work to get your student loan debt under control and keep credit card debt at a minimum. Learn about debt-to-income (DTI) ratio, a number that will eventually help you get a mortgage. Prospective lenders will want your DTI to be 43% or less to qualify for a home loan, according to JPMorgan Chase & Co. Paying off credit cards can give your DTI a big boost as can paying off any installment loans such as car loans or student loans.
A certified credit counselor can help you develop a plan of action if you’re having trouble paying down your debt.
3. Get a Head Start on College Costs
It's important to look for ways to pay for college that won't leave you drowning in debt. Four-year colleges are considered a primary path to a college degree but other more affordable options can reduce how much you'll pay. Taking classes online, attending a community or junior college, or opting for a technical school all offer avenues to a secondary education that cost less than traditional four-year schools or make the first part of a college education less expensive.
Taking time off to work full-time and save up for tuition costs is another way to pay for college. You could also apply for the Federal Work-Study program in which you can work part-time while attending school either part- or full-time.
Searching for scholarships and grants is another way to pay for college. Don't rely solely on your school's financial aid office to match you with possible options. Several search engines are available to help you locate scholarships that you may qualify for to help pay for tuition and college costs. They include Fastweb, Mometrix, StudentScholarships.org, Unigo, and Scholly.
4. Get a Financial Picture From Parents
Talk with your parents about how to build a secure financial foundation as you begin to take control of your finances. They can help answer any questions you may have about building up your savings, managing your credit card use, establishing a good credit history, and understanding employer-sponsored retirement accounts and benefits.
Search for a local banker or financial advisor you can talk with regarding your financial issues and goals if your parents don't have a strong financial history and build your financial expertise by learning on your own.
Who Belongs to Generation Z (Gen Z)?
People born from 1997 to 2012 are considered Gen Z. The eldest among them will reach age 27 in 2024. They're the generation right after Millennials.
Do Gen Zers Tend to Be Financially Secure?
Not yet. Half or 50% are making just enough to cover their basic living expenses and 35% have student loans to pay off. One-third of them report having suffered financially due to the COVID-19 pandemic.
Are Gen Zers Saving for Retirement?
Gen Zers are the most retirement-conscious generation. A staggering 70% of them have some sort of retirement plan whether it's employer-sponsored or self-administered.
Gen Zers started saving for their retirement at age 19. Compare that to Millennials who started at age 25, Gen Xers at age 30, and Baby Boomers at age 35. They anticipate needing to save $500,000 for retirement, however, which may prove to be an underestimate given that financial experts tend to peg the number at as much as $2 million.
The Bottom Line
Gen Z’s oldest members are beginning to move into their post-education years and this brings a wealth of new financial considerations. It includes planning for retirement, finding ways to pay for college, setting the stage for a strong financial future, and buying a home. Having a firm financial plan in place can go a long way in helping them achieve their financial goals and provide financial security as they get older.
