5 Real-World Tips That Can Help Gen Z Increase Savings

Stop buying avocado toast. Cancel that streaming service. Lay off the lattes.

Younger generations have been hearing the same advice for years, as if home ownership, a cushy retirement or some other financial triumph were as easy as cutting out a few small luxuries. Are young people really sabotaging their own retirement? Probably not, given the “imperfect" financial storm they're facing: The costs of housing and higher education have skyrocketed, and inflation is taking an expanding bite out of budgets.^{1, 2}

There's no question Gen Z is feeling some angst about their financial situation; nearly one-third of this cohort reveal they don't feel confident managing money, and 82% say they aren't where they want to be financially.³

Fortunately, you can take steps to boost your financial situation—and they don't necessarily entail eliminating all the everyday experiences and purchases that bring you joy.

Try these five steps to help shift your mindset so you can feel empowered in your financial life.

1. Create a Workable Budget

Budgets get a bad rap as documents that tell you all the ways you can't spend money. But what if you reframe your budget as a way to know how much you can spend?

Build a simple budget that takes all your income into account, and then divide your expenses into categories of “needs," “wants" and savings. After accounting for your savings and necessary expenses like shelter, food, insurance, utilities, etc., you can populate the “wants" bucket with things that are important to you, whether it's regular self-care or the latest video game.

If you're like the 66% of Gen Z who agreed with the statement, “I know how to make a budget and track my income and expenses, but I haven't done it," then do it.³ Today.

2. Tackle Your Debt

You may be one of the millions of Americans waiting to hear the >outcome of student loan debt relief. While the plan remains in limbo, payments have been put on hold, which gives you a prime opportunity to address other sources of debt you might have.

High-interest debt can weigh you down, especially if rising interest rates cause the amount you owe to spiral. Putting a plan in place can help you feel like you're making significant progress.

One of the best methods for erasing debt in the most cost-effective way possible is using the “debt avalanche" principle, whereby you chip away at your debts with the highest interest rate first. Continue paying the minimum balances on all your other debts so you don't ding your credit score with unpaid bills, then apply as much additional money as possible to the highest-interest debt until you've paid it off. Then move on to the next highest, and so on.

3. Set a Variety of Financial Goals

Having a clear sense of direction can be empowering as you manage your finances. It can be helpful to create goals in multiple categories and invest money in an interest-bearing savings account that corresponds to when you'll need it. You can choose savings vehicles with various levels of liquidity, according to the relative time horizon. For example:

• • For a long-term goal like retirement, look into an IRA.
• • Savings for medium-term goals, like a down payment on a house, can be safely stored in a certificate of deposit (CD) account.
• • With a short-term goal, such as a vacation fund for a dream trip, a money market account can offer easy access.
• • A readily accessible “emergency fund" stashed in a high yield savings account can allow you to address unexpected costs.
• • While a credit card can be a great way to cover bills (while also earning rewards!), take care not to run it up with charges you won't be able to pay in full each month.

All of these savings vehicles accumulate interest, which means your money will grow even faster without your doing a thing.

Make sure to automate your savings via direct deposit so you won't be tempted to spend the funds when they hit your checking account.

4. Build Your Financial Literacy

If the above terms sound unfamiliar, it's likely because many young adults haven't received sufficient exposure to personal finance topics. But becoming financially fluent doesn't have to be intimidating.

Many Gen Zers are seeking accessible tutorials by following “finfluencers" (financial influencers) on TikTok, Reddit, YouTube and other social media channels, where key financial concepts are broken down so they're easier to understand. One survey found that 79% of Gen Z and Millennial Americans had sought financial advice on social media, and 62% felt empowered by this access.⁴

Of course, like any content you encounter on social media, not all of it is trustworthy. The survey referenced above found that only one-third of viewers verified the experience and qualifications of those to whom they were turning for financial advice on social media.⁴

It's important to thoroughly research all investments, and always read the fine print. A few red flags to watch out for include promises or claims that sound way too good to be true, or an investment you fundamentally don't understand (like crypto or rare collectibles). Also watch for “sponsored content," where an influencer is being compensated for pushing a specific investment. The Federal Trade Commission requires influencers to disclose relationships, but the bottom line is always “buyer beware."⁵

While amassing your own knowledge is empowering, it can be wise to seek outside advice as well. Consider consulting a fee-only financial planner who can give your financials a once-over and suggest attainable goals.

5. Ask $30,000 Questions Rather Than $3 Questions

We're looking at you, avocado toast and lattes. Sometimes we fixate on these smaller, routine expenses because they're right in front of our faces. But in reality, it's the large costs that really have the ability to swing our everyday picture. That's the philosophy espoused by financial expert Ramit Sethi, author of “I Will Teach You To Be Rich." Some of these “$30,000 questions" include:

• • Have you negotiated your salary?
• • Do you have the optimal asset allocation?
• • Are you overpaying in investment fees?
• • Are you living in an affordable housing situation?

Many Gen Zers are boosting their bottom line by avoiding some of life's larger expenses, like housing—in fact, the number of U.S. adults ages 25 to 34 living in a multigenerational household has climbed to 25%, up from 9% in 1971.⁶

And while small joys like bubble tea with a friend or little luxuries like that on-trend nail polish shade can make life fun, be sure your splurges aren't undermining your future financial goals.

Instead, take any savings you're realizing on big-ticket items and put them to work in your savings accounts, or mindfully choose to spend them in ways that will enrich your life today, such as traveling with a friend or even gifting mom and dad with a pizza oven you can all appreciate.

Riverstones Vista Capital Can Help You Plan for Tomorrow While Enjoying Today

Approaching your money from a position of fear may lead to excessive spending or saving, which could make you miss your financial goals—which could then deprive you of a healthy financial future or the satisfaction of reveling in your life today. Empowering yourself to handle your money wisely will reap benefits for today as well as tomorrow.

 

Cathie Ericson is an Oregon-based freelance writer who covers personal finance, real estate and education, among other topics. Her work has appeared in a wide range of publications and websites, including U.S. News & World Report, MSN, Business Insider, Yahoo Finance, Market Watch, Fast Company, Realtor.com and more.

 

READ MORE: How High Yield Savings Work for Emergency Funds

 

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