Financial Habits of Gen Z: What They Can Learn from Gen X and Millennials

As the youngest generation to join the workforce, Gen Z (born roughly between 1997 and 2012) is reshaping the financial landscape. They value experiences, prioritize sustainability, and rely heavily on technology for managing their money. However, like every generation, they can benefit from the financial lessons learned by those who came before them. Here’s a closer look at Gen Z’s financial habits, where they tend to spend their money, and what they can learn from Gen X and Millennials.

Understanding Gen Z’s Financial Habits

1. Experience Over Material Goods: Gen Z often prioritizes spending on experiences like travel, concerts, and dining out rather than physical possessions.
2. Technology-Driven Money Management: This generation is highly tech-savvy and uses apps and platforms for budgeting, investing, and digital payments.
3. Value-Driven Spending: Gen Z is highly conscious of environmental and social issues, often choosing brands that align with their values, even if it means paying a premium.
4. High Student Loan Debt Awareness: Having witnessed Millennials’ struggles with student loans, Gen Z is cautious about taking on debt, yet many still face rising education costs.
5. Side Hustle Culture: Many Gen Z individuals embrace gig work and side hustles to boost their income streams.

Where Does Gen Z Spend Their Money?

Gen Z’s spending patterns reveal their priorities and challenges:

• Entertainment and Streaming Services: Subscriptions to Netflix, Spotify, and gaming platforms make up a significant portion of their budgets.
• Tech and Gadgets: Smartphones, wearables, and the latest tech accessories are often seen as essential investments. In fact, most of their shopping is done online as well, with 74% saying they prefer to shop via their smartphones.
• Health and Wellness: From gym memberships to mental health apps, Gen Z spends their money on self-care.
• Sustainable and Ethical Brands: Gen Z is more likely to purchase from companies with sustainable practices or socially conscious missions. However, there's a noted discrepancy between their sustainable intentions and actual purchasing behaviors, particularly with the popularity of fast fashion.
• Food and Beverage: Dining out, meal delivery apps, and specialty coffee shops are a frequent expense. In fact, Gen Z spends an average of $2,483 annually on dining out, favoring fast-casual and affordable options.

Lessons Gen Z Can Learn From Gen X and Millennials

1. The Importance of Emergency Savings (Gen X): Gen X is known for their resilience during economic downturns, emphasizing the importance of having an emergency fund. Gen Z can adopt this habit to navigate financial uncertainties.
2. Avoiding Lifestyle Inflation (Millennials): Millennials often struggled with balancing debt and lifestyle inflation as their incomes grew. Gen Z can learn to maintain a modest lifestyle and focus on saving or investing any extra income.
3. Building Credit Wisely (Gen X and Millennials): Both generations experienced the pitfalls of credit card debt. Gen Z should focus on using credit responsibly to build a strong credit score for future financial milestones, like buying a home.
4. Investing Early (Millennials): Millennials’ late start in investing often delayed their wealth-building journey. Gen Z has the advantage of starting young, benefiting from compounding interest over time.
5. Financial Literacy Matters (Gen X): Gen X often lacked access to financial literacy resources growing up. Gen Z has a wealth of tools and information at their fingertips and should take advantage of online courses, podcasts, and financial advisors to deepen their knowledge.
6. Balancing Experiences with Long-Term Goals (Millennials): While Millennials chased experiences, many found themselves unprepared for major financial goals. Gen Z can learn to enjoy life without sacrificing future stability by budgeting for both fun and savings.

How MidWestOne Bank Can Help

At MidWestOne Bank, we understand that every generation faces unique financial challenges and opportunities. We’re here to help Gen Z develop smart financial habits with:

• Savings and Investment Accounts: Start saving early and let your money grow with our high-yield accounts.
• Budgeting Tools and Resources: Use our online tools to set financial goals, learn about money wellness, and calculate future costs.
• Personalized Financial Advice: Our advisors can help you create a plan that balances your immediate needs with long-term success.
• Credit-Building Products: From secured credit cards to low-interest loans, we have solutions to help you build credit responsibly.

Gen Z has the tools and opportunities to set themselves up for financial success. By learning from the financial missteps and victories of Gen X and Millennials, they can create a more stable and prosperous future. Let MidWestOne Bank guide you on your financial journey.

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