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A Fintech Survival Guide to Understanding Gen Z Finance

Education | Feb 8, 2024

Understanding Gen Z Finance:  A Fintech Survival Guide

As Generation Z (born between 1997 and 2012) steps into financial independence amidst economic challenges, their unique financial behaviors, preferences, and terminologies come to the forefront.

Understanding these aspects is crucial for fintech professionals aiming to engage, communicate, and develop services for this demographic effectively.

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This guide aims to provide fintech professionals with insights into Gen Z's financial mindset and practical tips for engaging with this generation effectively. As Gen Z's influence grows, so does the importance of adapting fintech offerings to meet their expectations and needs.

Gen Z Finance Terms Explained

These Gen Z finance terms open up conversations about finances in a more relatable and less taboo manner.

  • Bougie / Boujee: Refers to someone with expensive, lavish tastes. It's about enjoying the finer things in life without shame.
  • Bread: A slang term for money, derived from the idea that bread is made of dough, which is another common slang term for money.
  • Cash Stuffing: Also known as the cash envelope method, this budgeting technique involves allocating specific cash amounts for different expenses. It has gained popularity on TikTok among Gen Z, though experts caution against having too much cash on hand.
  • Doom Spending: Similar to doom scrolling, doom spending involves spending money despite economic concerns, often as a way to cope with stress. A significant portion of Gen Z engages in this behavior, choosing to cherish purchases now instead of saving for an uncertain future.
  • Drip: Used to describe someone wearing expensive items or a nice outfit in general. It's about showcasing wealth or style through clothing and accessories.
  • Finesse: To trick someone into giving you something, often used in the context of acquiring money or benefits cleverly.
  • Flex: To show off possessions, knowledge, or other intangibles. It's about displaying one's success or wealth openly.
  • Free Money: A term that encompasses any monetary gain that doesn't affect one's current bank account balance, such as gifts, store credits, negative credit card balances, and cash back.

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  • Girl Math: A lighthearted concept among young women rationalizing spending through humorous comparisons, like considering a purchase "practically free" if it's under a certain amount.
  • Glo Up: When someone looks better or has a better lifestyle than before. It's about personal improvement and success.
  • Guap: Means a lot of money. It's used to describe having a significant amount of wealth.
  • Gucci: Derived from the high-end fashion brand, meaning you're doing well or everything is good.
  • Live Your Best Life: Enjoying life to the fullest in a unique, individual way.
  • Loud Budgeting: A term coined by TikTok user Lukas Battle, emphasizing saving money not because of a lack of funds but as a choice to not spend. It's about being vocal and proud of saving money, seeing it as a flex.
  • Secure the Bag: Getting money or accomplishing goals in general. It's about achieving success and financial stability.
  • Soft Savings: This concept describes Gen Z's preference for spending on experiences and personal growth now rather than saving for the future. They prioritize mental wellbeing and personal fulfillment over early retirement.

Financial Mindset and Challenges

  • A significant challenge for Gen Z is their lack of emergency savings, exacerbated by high living and college costs, alongside entry-level job wages. This lack of savings negatively impacts their mental health, with over half reporting financial concerns as a stressor.
  • Gen Z shows a preference for less volatile investments, with 38% moving their money from stock-related investments to safer options like savings accounts, money market funds, CDs, or government bonds. This is a higher percentage compared to millennials (33%) and Gen Xers (17%).  Having said this, there is some mixed research on this question with a CFA and FINRA survey concluding that Gen Z Canadian's are actively investing.

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  • The impact of the economy, including inflation and rising prices, has a significant impact on Gen Z's mental health. Key stressors include paying for everyday expenses and housing costs, with over a quarter reporting unemployment and actively seeking jobs.
  • Achieving financial independence is a considerable challenge for Gen Z. They face unique financial challenges as they navigate adulthood, such as paying for college, starting a career, and establishing a budget.

Approach to Money

  • For Gen Z, education is often viewed as a pathway to financial stability, with 88% of the first Gen Z grad class choosing majors based on job availability.
  • Growing up in the age of technology, Gen Z's money habits are heavily influenced by the internet and social media. They are more likely to seek financial advice online and use budgeting tools and apps.
  • A significant portion of Gen Z receives financial support from parents for housing and health insurance. However, there are misconceptions about the importance of building credit and investing for retirement, with many not recognizing the need to start these financial practices early.
  • Gen Z prefers online banking, with a majority content to do their banking completely online with only 20% opting for brick-and-mortar for everyday financial needs. They are less likely to have written a check or visited a physical bank, indicating a shift towards digital financial management.

Bottom Line

Understanding Gen Z's unique financial challenges and mindset is crucial for fintech companies looking to engage this demographic.


Fintech Opportunities in Wealthy Retired Boomer Markets

Fintech Opportunities in the Wake of Tightened Credit Liquidity in Canada

Fintech solutions that offer educational resources, tools for managing finances, and options for low-risk investments can appeal to Gen Z's desire for financial stability and mental well-being. Additionally, promoting financial literacy and independence through user-friendly platforms can help address some of the misconceptions and anxieties Gen Z faces regarding money.

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