How young people can avoid the financial pitfalls of previous generations

Uziel Gomez, 26, can relate to his Gen Z clients who are navigating adulthood and personal finance for the first time. It’s no secret that young people have faced a range of financial challenges early in their lives and careers, including the Covid-19 pandemic, rapidly rising costs of living, and steep tuition, says Gomez, founder of the financial planning firm Primeros Financial. Some of his Gen Z clients ask him about how to help out their parents financially. Looking ahead to the future, Gomez knows he’ll face a similar predicament. “There’s some clients, they’re their parents’ full retirement plan,” he says. “Take me, for example, I’m my dad’s retirement plan.” That’s just one of the many scenarios Gen Z-ers seek help navigating. Young people are also wondering about how to save for sabbaticals before retirement, have enough in their emergency funds, and discern fact from fiction when evaluating money management tips from social media. I spoke to three young financial planners about the typical advice they give Gen Z as they map out their financial futures — and how it remains the same and diverges from the conventional wisdom given to the generations that came before. Coming up with financial goals that reflect your values Of course, some of the advice geared toward Gen Z mirrors that of their predecessors. When young clients come to Naima Bush, a financial guide at the firm Fruitful, she asks them whether they are building emergency savings, if they are paying off credit card or other high-interest debt, and if they’re getting a company match on their retirement savings account — three perennially important priorities. One of the primary tasks Bush assists her clients with is getting out and staying out of high-interest debt. While many Gen Z-ers want to avoid taking on student loan debt, it’s pretty easy for them to accumulate debt in other ways, such as buy now, pay later apps, she says. Beyond that, Bush works with her Gen Z clients on their broader financial goals and urges them to interrogate where those aspirations originated. A common one that she broaches in her conversations is the dream of home ownership, which has become out of reach for many young would-be buyers. “Because buying a house is such a big decision, [I ask] is this something that you want to do because you really want to plant roots somewhere, or is this something that you want to do just for the sake of ‘Everyone else is doing it,’” Bush says. “Let’s figure out something else that is really more in line with your values.” Some clients want to be able to sustain their current lifestyle, while others want to live overseas for a while, Bush, 33, explains. Her entrepreneurial clients, meanwhile, want her help with mapping out how they can get their business or side hustle off the ground. Rethinking careers and retirement Though many Gen Z-ers receive retirement benefits through their jobs, the concept of retirement will likely look very different for them. Nate Hoskin, founder and lead adviser at Hoskin Capital, says relying on the Social Security system or traditional pensions no longer feels like a safe option for his young clients. In response to that uncertainty, Hoskin, 26, says his clients are working hard now to better achieve stability in the future. That might mean working on weekends or longer hours, holding down a job as they study for a degree, or delaying milestones like buying a house, he explains. Hoskin also provides projections for how much they’ll need to save to stay afloat in retirement without Social Security, making any of those payouts a nice bonus, he says. Unlike many baby boomers, Gen Z-ers don’t see themselves remaining loyal to one company for decades and retiring with a pension. As a result, the generation is more inclined to job hop until they find a role that’s more rewarding or better aligns with their passions, Bush says. Bush, who works with clients earning a range of incomes, says the key to building the life you want is creating the habit of saving, even if it’s just $5 or $10 per month. And as your income increases, don’t drastically increase your spending. “You should be focusing instead on saving more for future you,” Bush says. Be wary of flashy financial advice on social media One problem specific to Gen Z is the firehose of financial advice they are exposed to through social media. While hearing other people’s experiences on TikTok and Instagram can be helpful and occasionally empowering, some of the advice out there is downright misleading, Gomez says. Among the bad pieces of advice he’s had to debunk are that it’s better being an entrepreneur than having a traditional 9-to-5 to build wealth and that having a spending plan (meaning budget) is limiting you, Gomez says. Bush says Gen Z’s social media savviness can help them find useful tips, but it can also overwhelm them with information that isn’t applicable to their situation. “This can cause you to have decision overload or decision fatigue and information overload,” Bush says. The flood of information Gen Z ingests through social media doesn’t just make it harder to find good advice; it also causes them to compare themselves to others. Gomez says he’s had to counsel his clients through FOMO (fear of missing out) while watching others make their own money moves. Some were interested, for instance, in investing in cryptocurrency or individual stocks that were going to make it “to the moon” a few years ago. Rather than following and trying to beat the market, “investing should be boring,” he says. He has also had to field questions about building passive income investments — a frequent subject of social media’s hustle aficionados. “A lot of people try to find a lot of get rich or get wealthy quick and easy information that is available online,” Gomez says. “Really, it’s about honing down and controlling what you can control and really focusing on your career, saving what you can and investing as well.” Caring for loved ones Many young people are already thinking about how they want to support their parents financially in the future. Gomez advises his clients to determine how much help their families need and how much they can realistically afford to provide, whether that’s on a monthly basis or for one-off emergencies. They should also consider the trade-offs of these arrangements, Gomez says. Will it affect their lifestyle? Will it impact other goals, such as saving for a home, retirement or other priorities? Establishing boundaries is also crucial. In addition to figuring out how much support they can give, Gomez recommends being clear about whether the financial support is strictly for essentials, such as housing, medical expenses, and groceries, or if it can be used for discretionary expenses like travel, dining, or entertainment. Take that vacation One thing Gen Z-ers seem to be clear on is that they want to use their money to embark on new experiences. Some have plans to relocate and live abroad for months at a time, Bush says. Others want to make sure they have money set aside for making meaningful memories — like seeing Beyoncé in concert whenever they can. Still, Hoskin has found that even his high-earning Gen Z clients are cautious with money — they pour much of their income into emergency funds, health savings accounts, and retirement accounts, and are prudent even with their discretionary spending. For those who make a healthy income and are still concerned about the cost of taking a vacation or spending $300 on a flight home to visit their parents, Hoskin encourages them to go. That hesitancy likely stems from Gen Z-ers entering an unstable economy and developing a survival mindset, he says. They worry that if they part with their money, it won’t replenish in the future, he adds. Noticing a similar pattern among his clients, Gomez adds that his Gen Z clients, who often are the first in their family to build wealth, feel guilty about spending when they feel that they should instead save for the future or save for their parents. “Money isn’t all about just numbers and optimization,” Hoskin says. “The whole goal, the whole reason you’re working so hard and you took this job, is so you can do things like that and hit all your goals.”

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How young people can avoid the financial pitfalls of previous generations