As financially savvy individuals actively interested in managing our own personal finances, we are keenly aware of the rapidly changing landscape in personal finance.
A significant part of this change comes from the evolving financial needs and behaviours of younger generations, particularly millennials and Generation Z.
With technology reshaping how finance is managed and planned, understanding these generations is essential to tailoring effective financial advice, whether as professionals or family members.
Who are these young ‘uns?
Millennials, typically identified as those born between the early 1980s to the mid-’90s, witnessed a dramatic shift in technology during their formative years. The advent of the internet, the emergence of personal computers and, later, the ubiquity of smartphones have all played substantial roles in shaping this generation’s interaction with the world.
In terms of financial behaviour, millennials are often characterised as tech adapters. They have seen a world both with and without online banking; as such, they’ve been a driving force behind the acceptance and growth of digital financial services.
These are the generations that witnessed their parents navigate the 2008 financial crisis and saw firsthand the impact of not having a solid financial plan in place.
Having come of age during the 2008 financial crisis, millennials understood the importance of financial planning, diversification, and risk management at a relatively early age. Consequently, they are increasingly financially savvy and more inclined to actively manage their money from an early age.
Gen Z, born from the mid-1990s to the early 2010s, is the first generation to grow up in a truly digital world. For this group, technology is not an added layer of existence; it is thoroughly woven into their lives.
They are digital natives: their relationship with technology, therefore, is fundamentally different.
Financially, Gen Z has a heightened awareness of the importance of personal finance, thanks in large part to the ease of access to information online.
Moreover, having observed the millennial struggle with student loans and challenging job markets, many Gen Z-ers are proactive about avoiding similar pitfalls. They’re more likely to seek information about personal finance, budgeting, and investing from a young age.
Recognising needs and wants
These younger generations’ financial needs and behaviours vary greatly from their predecessors’. They are more inclined towards digital financial services, with a KPMG study showing that 67% of millennials prefer digital banking, valuing convenience, speed, and 24/7 accessibility – the hallmarks of digital services.
It’s worth noting that this tech-savviness does not replace the need for human interaction. These generations still value advice and insights from trusted human advisers, especially for complex financial decisions.
However, they prefer a blend of human and digital interaction, expecting their financial advisers to be as tech-forward as they are.
Moreover, they place a strong emphasis on financial wellness and independence. A Bank of America report indicates that 73% of millennials are saving for a specific goal, compared with just 57% of Gen X.
Gen Z-ers, still largely students or early in their careers, are keen on saving and investing, demonstrating financial maturity at an early age. Yet, members of this generation are saddled with unique financial challenges: they are often burdened with student debt, face skyrocketing property prices, and grapple with a volatile job market.
This financial landscape requires tailored advice, taking into consideration their long-term financial goals, existing financial burdens, and preferred digital platforms.
To effectively engage and assist millennials and Gen Z in their financial journey, advisory roles need to be adapted and reframed. The approach should be more of a partnership, providing not just financial advice but also financial education to empower these individuals in their financial decisions.
Technology should, therefore, be integrated into service delivery, utilising digital tools to enhance engagement. Providing advice on a range of digital platforms, from email and mobile apps to video calls and social media, can make financial planning more convenient and engaging for them.
Their focus on financial wellness should be acknowledged and supported; for example, they should receive advice on managing student loans, saving for retirement, or planning for first-time home purchases. The key is to help them balance their immediate financial needs with their long-term financial goals.
Moreover, we need to understand their interest in socially responsible investing. According to a survey by Morgan Stanley, nearly 90% of millennials are interested in sustainable investing; as such, tailoring advice to include ESG (Environmental, Social, Governance) investment opportunities can cater to this preference.
In conclusion, millennials and Gen Z are not just the future of the economy – they are actively shaping it. Financial advisers need to embrace change, harness technology, and align their strategies with these young people’s needs.
In this era of technological innovation and financial change, we can adapt to better shape a more inclusive, sustainable, and prosperous financial future for all.