Best Places for Gen Z to Save Money
Gen Zers are growing and entering in strength the working force. With that, this generation is starting to shape its financial profile, such as how they use their money and where they save it for the future. As a particularly savvy-savings generation, Gen Zers are constantly looking for the best way to deal with their assets. Thus, in this article, you will learn the best places for Gen Z to save money.
The Profile of Generation Z
Generation Z is composed of those born at the turn of the century and ranging in age from 14 to 24. Gen Z is a youth generational group that has been bringing new rules to the table when it comes to dealing with their finances. This generation thinks more about the future than millennials did but is way more tech savvy than boomers. They focus more on money, and they leverage the internet to make smarter decisions. They are much faster learners and got used to teaching themselves new things. However, what most differentiates Gen Z from the previous generations is that they have grown up with technology and the internet. That, combined with experiencing a crisis from a young age, shaped Gen Z into a realistic but impatient generation when it comes to finances. Thus, services in this field that were built for Gen Zers need to combine these two sides of this generation. But how did that come to be?
Since most Gen Zers are still quite young, many think they don't have a clear picture of what they really want yet. However, recent surveys indicate that members of this generation hold strong opinions, habits, and preferences that contrast with those held by previous generations of millennials. In fact, Gen Z’s views and behaviors bring them closer in mindset to their parents, grandparents, and even great-grandparents, who grew up amid the Great Depression. As unusual as that might sound, there is a very logical explanation behind that.
The economic events that unfolded during a person's childhood and teenage years tend to affect their views on financial matters. Taking that into consideration, Gen Zers have a not-too-distant economic downturn that left an indelible mark on their consumer behavior. This mark is similar to what the Great Depression did to their ancestors. Millennials, on the other hand, grew up in a very positive financial moment in history. They were optimistic and believed in the American Dream. This American Dream concept was a baby boomers’ notion that disappeared a little with Generation X but was brought back by Millennials. The reality check for Millennials only happened when they were already adults, with the 2008 financial crisis.
Generation Z, however, was quite young when the financial crisis happened, which made them more financially realistic. For instance, this generation doesn’t believe they can count on the concept of the American Dream.
The Savvy-Saver Gen Z
As explained, Gen Zers don’t believe much in the concept of the American dream. Due to that, this generation is considered hardworking, debt-averse, economical, and has already begun to save for retirement. Even though the oldest Gen Zers are 24 years old, only 10% of this generation doesn’t have a bank in the US. 12% of them are also already saving for retirement – with 35% of Gen Z planning to start saving for it in their 20s. In fact, Gen Z is considered the generation that most focuses on saving money.
Best Places for Gen Z to Save Money
Finally, it is time to see the tools and places where Gen Zers save money. From more traditional savings accounts to crypto savings accounts, all Gen Zers can find great solutions to save their money. Ultimately, it will depend on your financial needs and goals as someone that is part of this generation. Thus, these are the best places for Gen Z to save money:
Traditional Savings Accounts
Bank savings accounts are a more traditional way to save money. They do offer some perks, such as bank branches, FDIC insurance, and in person customer service. However, they have become less attractive because of their low-interest rates. Thus, while they are still a very valid option for more financially conservative Gen Zers, many individuals prefer to look for a better-paying option.
Online Savings Accounts
A great and easier-to-use alternative to a regular savings account is an online savings account. They tap into the tech savvy side of Gen Zers, as well as their impatience for slow services. This type of account is very similar to standard savings accounts, with the obvious difference that it only operates online. This type of savings account is extremely attractive due to its higher interest rates if compared to traditional savings accounts. In a traditional brick-and-mortar bank, the interest rate you can earn with your savings account will be around 1% to 1.25% annually. In comparison, a digital savings account can offer rates from 1.80% to 2.25%, which is, on average, 10x higher. On top of that, many online savings accounts offer even higher interest rates than that. Some of these online platforms provide up to 10% of interest rates. Before you become suspicious, digital savings accounts can offer much higher interest rates because they don't have all expenses that come with a physical location and its employees.
The lower expenses of online savings accounts also allow them to charge you low to no fees, regardless of your account balance. In addition, many digital savings accounts have no minimum amount to open your account. Besides the financial advantages, online savings accounts offer easy access through your phone, tablet, or computer with user-friendly platforms. All these factors make online savings accounts a great alternative to regular savings accounts. Unless, of course, in-person customer service and physical branches are a must for you. Since few Gen Zers have the need of an in-person service, usually that is not an issue.
Crypto savings accounts are a great fit for Gen Zers. They englobe the tech savviness and distrust on traditional financial institutions of Gen Zers, while adding very high yielding. But what are crypto savings accounts exactly?
A cryptocurrency savings account allows you to participate in the cryptocurrency market while still earning interest. It is just like a regular bank savings account but focused on cryptocurrency. In some, you will need to invest already in crypto, while others accept fiat currencies. This is how it works:
For the most part, it works just like regular savings accounts. You put money into a savings account, the institution lends your money to investors, and you earn an interest rate in exchange. However, in the case of crypto savings accounts, the funds for this process will be cryptocurrency.
So, whenever you create a crypto savings account, you are putting money into a digital currency like Bitcoin or Ethereum. Then, the savings account provider will lend your cryptocurrency to borrowers in return for a portion of interest. You will receive a share of this interest. Since there is a scarcity of money invested in crypto, with more demand than offer, the interest rates of these cryptocurrency loans are very high. That is how these crypto-based savings accounts manage to give their clients interest rates that can go as high as 12%.
To keep the crypto savings accounts safe, most of them work with overcollateralized lending partners. They also use strategies similar to banks, such as distributing one investor's money throughout many borrowers, assessing investment risks, and so on.
Still, it is important to be careful. Cryptocurrency is a very new and experimental market. Even though most crypto savings accounts providers take safety measures, it is a volatile market and most of these accounts and not FDIC insured. Like every type of investment, make your due diligence and understand the risks involved in it. Once this alert is given, it is important to highlight that major safety issues with crypto savings accounts that resulted in major money losses are yet to be seen.
The Bottom Line
Ultimately, the decision of going for a more traditional or disruptive place to save money is up to the investor’s financial needs and goals. Gen Z has a very particular financial profile which makes it a great fit for whichever of the options. What is more universal in this generation is the understanding of the importance of saving money from a young age. Thus, regardless of where you, as a Gen Zer, decide to place your savings, preparing for the future early on will be a wise decision.
