COVID-19’s effects on the market, employment and money will turn Millennial workers into great savers. Generation Z, experts say, is already there.
The age cohort, identified as those born after 1997, has already shown a heightened consciousness with spending and savings habits. According to the Center for Generational Kinetics (CGK), 12% of Gen Z workers have initiated their retirement savings, while 35% plan to begin saving in their 20s. “These are people that are 23 years old and younger, and they’re already saving for retirement,” notes Jason Dorsey, a global researcher at CGK who specializes in the Millennial and Gen Z workforces. “They’re doing more comparison shopping, they’re shopping more in thrift stores, they were the ones that have the emergency accounts.”
The financial savviness exhibited by Gen Z is warranted, he explains. Gen Zers saw their parents—typically either Generation Xers or Millennials—struggle through financial downturns during the Great Recession and experience other money worries. This exposure steered a predisposition to save money, more so than most generations, and so much so that Gen Z is now being likened to the Silent Generation, which was made of people who witnessed economic hardships as children during the Great Depression. “Gen Z does not want to end up like their parents. There’s this desire of not wanting to relive the past. They don’t want money to be the reason they can’t live their own way,” adds Jason Bornhorst, CEO and co-founder of First Dollar, a health savings account (HSA) company geared toward Gen Z and Millennials.
The effects of COVID-19, therefore, will likely reinforce the idea that if Gen Zers are looking to live and make money on their own terms, they’ll need to have their finances, and savings, under control. “This is going to change fundamental desires about how they choose their employment and how they allocate their paycheck, both for the current needs and future needs,” Bornhorst continues.
Aside from an influx in savings, industry professionals can expect a spiked interest in traditional workplace benefits, now more than ever. A previous study from Lincoln Financial Group and the Center for Generational Kinetics found retirement plans and health insurance are among the top benefits sought out by this group, not the lifestyle benefits notably associated with younger workers. Sixty percent of Gen Z workers stated they would accept a 10% lower starting salary in return for a better benefits package. “Already prior to COVID-19, these workers were showing that these benefits are important to them,” Dorsey says.
Now exacerbated by the coronavirus crisis, Dorsey and Bornhorst expect to see a rise in health care engagement—most notably with the HSA. Born and raised during the smartphone boom, Gen Z will likely prefer the app-friendly benefit, where participants can check HSA amounts and review health care plans via smartphone. Because HSAs follow participants throughout their careers without a penalty involved, their convenience is another attractive offering to younger workers, who are more open to job hopping than planting themselves at their employer for many years. According to Bureau of Labor Statistics (BLS), the median tenure of workers ages 25 to 34 is 2.8 years. Gen Zers, with the oldest members at age 23, are prone to follow the same path.
In addition to their portability, HSAs are tax-deductible and can build tax-free wealth through deductible contributions, and, for a generation so keen on financial spending and saving, that alone may be enough to pursue them.
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