Not a day goes by in which I don’t hear or read the words, “millennials are lazy.” Even though they graduated from college and took on a boatload of debt to boot.
Now many millennials are earning entry-level salaries and have put on hold big life decisions like moving out, buying homes, and having kids. All to handle paying off student loan debt first.
And now, the generation below them, Generation Z (or Gen Z), has grown up watching this. They’ve seen the debate between millennials and everyone else and they’ve taken notice.
The effect? A generation coming of age that might be the most practical generation yet, with almost three times less debt than Baby Boomers according to Experian data.
What is Generation Z?
Born around 1996, Gen Z directly follows the millennials. Described by some as “millennials on steroids,” this generation outnumbers millennials by a million. And, they’re flipping the script on how they spend their money, what they spend it on, and how they view things like debt.
This tech-savvy generation grew up in a time defined by more instability than America has seen in decades. And that’s brought up a group of people more similar to the Silent Generation (born between 1925 and 1945) than anyone else.
The New York Times illustrates the instability defining this generation and shares the feelings of one such Gen Z’er:
“I definitely think growing up in a time of hardship, global conflict and economic troubles has affected my future,” says Seimi Park, a 17-year-old high school senior in Virginia Beach.
Park goes on to explain how she always dreamed of a career in fashion, but recently shifted her sights to law because it seemed safer.
Additionally, Park says that this worldview isn’t hers alone. It’s apparent within in her social circles as well:
“This applies to all my friends,” she tells The New York Times. “I think I can speak for my generation when I say that our optimism has long ago been replaced with pragmatism.”
Whether it’s about consumer finances or privacy rights, this is a discerning generation. And that means they have a far different approach to things like credit credits and debt.
5 ways Gen Z handles finances
Members of Generation Z are just starting to get exposed to finances. But those at the top end of it at 18- and 19-years old are doing things much differently than generations past.
1. They have fewer credit cards
According to Experian’s 7th Annual State of Credit, Gen Z carries fewer credit cards and has less average debt than previous generations. That includes the Silent Generation, Baby Boomers, Generation X, and Generation Y (the millennials).
How much less? Compared to the Baby Boomers’ average 2.93 credit cards, Gen Z only has 1.29 credit cards.
2. They take on less debt from the get-go
Compared to the Baby Boomers’ average of $42,628 in debt, Gen Z has only $14,446. That’s about three times less debt overall.
You could argue that this is because the Generation Z age range prohibits them from being able to accumulate as much debt. In short, maybe in a few decades, they’ll be exactly where the Boomers are now.
But given the fact that many are entering college, where student loans and student credit cards flow in abundance, Gen Z has just as much opportunity to go into debt as their older counterparts.
3. They expect more from their money
However, if Gen Z is going to spend their money, they expect more from it. Marcie Merriman, Executive Director of Growth Strategy at Ernst & Young, explains why to Business Insider:
“When it doesn’t get there that fast they think something’s wrong,” Merriman says. “They expect businesses, brands [and] retailers to be loyal to them. If they don’t feel [loyalty] they’re going to move on. It’s not about them being loyal to the business.”
If businesses are successful at figuring out how to sell to Gen Z, will the pragmatism of this generation last? Or will they become just as indebted as the generations before them?
4. They prefer to save their money
While Gen Z works to avoid debt, they also show a preference for saving money when they can. In fact, 57 percent of them say they’d rather save their money than spend it immediately.
Not only that but like the generation before them, they’d prefer to spend money on experiences over things. Marcie Merriman, executive director of growth strategy and retail innovation at Ernst & Young, explains more in Business Insider:
“Both millennials and Gen Z through the recession … part of it’s been learned, some of it’s been trained — that products are no longer the cool thing,” Merriman says.
“It was cool to save a dollar … and save money and get something for really cheap,” Merriman adds. “Through that whole process they’ve learned the value’s not in the product or the thing, it’s in the experience.”
It looks like the age of The Experience Economy is going to hold strong for another generation.
5. They strive for career and financial stability
Gen Z isn’t just practical with how they use their money. They’re also practical about how they earn it.
Fast Company broke down a study done on Gen Z, and one of the findings showed just how much more conservative this generation is with thoughts of their future careers:
“Gen Z have been strongly shaped by their individualistic, self-reliant Gen X parents and they’re committed to avoiding the mistakes their meandering millennial predecessors made.”
How does that pan out for their plans? Fast Company goes on to explain:
“The participants in our study all claimed to be aiming for jobs in growing, less-automatable fields like education, medicine, and sales. And they’re obsessed with developing contingency plans to help them navigate the dynamic job market.”
This might seem to conflict with reports that Gen Z is a more entrepreneurial generation, but it lines up. According to Fast Company:
“The majority of Gen Z in our study are biased in favor of career and financial stability. Entrepreneurship is seen as a way to not have to rely on anyone (or anything) else, and their version of it will likely be focused on sustainable ‘singles and doubles’ ventures rather than Silicon Valley ‘home runs.'”
What’s next for Gen Z?
If current trends persist, Gen Z is looking to grow up into the most practical generation since the Silent Generation. Given the parallels between the two, it makes sense.
The Silent Generation saw the Great Depression and World War II. Gen Z saw the Great Recession and the war on terror. The Silent Generation was the first to see an attack on home soil with the attack on Pearl Harbor, and Gen Z saw the next with 9/11.
Then Gen Z saw the fallout of millennials oversharing on social media (sometimes costing them their jobs). And they’ve also seen a higher frequency of identity theft and data breaches than ever before.
It’s not surprising that the youngest among us are risk-averse. For as long as they can likely remember, finances have been a matter of safety and security. And Gen Z has watched how both can be lost in a second.
So how will all this impact them? According to Ad Age, we can expect this to be a generation of people who won’t be sitting around waiting for anything to be handed to them:
“Gen Z is a generation of highly-educated, technologically-savvy, innovative thinkers. They look for solutions on their own. They set out to make things on their own.”
Essentially, if a generation grows up to find that things like pensions, social security, and job opportunities won’t be ripe for the picking, then they’ll also understand the need to go out and carve their own success.
In that case, perhaps this is a generation we can all learn from since the future promises no guarantee of financial security for anyone.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.69% – 7.21%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|