Born between the mid-1990s and the early 2010s, Generation Z is breaking out from the comfort of the classroom, and into the daunting world of adulthood. From buying groceries to paying rent, and learning how to save for vacations and other large purchases, this generation is facing a series of financial “firsts” on their road to financial independence. Currently focused on establishing their careers and kickstarting their adult lives, members of this Gen Z cohort have not made their financial future a priority.
If you are guilty of this financial misstep, do not fret! Take this as an opportunity to learn how to establish healthy spending and savings habits to help you get your finances back on track.
Here are a few common Gen Z money mistakes and how to pivot away from them:
- Failing to Save
When you start your professional career, it can be exciting to celebrate by splurging on high-priced items or drinks on the town – but it may be in your best interest to hit the pause button. From car repairs to saving for your first home or experiencing a job loss, having no savings set aside to weather any unexpected financial storm could put you at severe financial risk.
To avoid this mistake, consider regularly setting aside small increments of your monthly pay cheque towards building your savings rather than celebrating this new windfall of funds with increased impulsive spending. Ideally, by putting 20% of your annual income towards your savings – 10% for emergencies and 10% for long-term financial goals – you’ll have the financial cushion you need to handle life’s unexpected moments and still have extra funds to help you achieve your short and long-term financial goals.
Now, if today’s high cost of living or paying student loans puts the goal of saving 20% of your annual income out of reach for you – not to worry. Even if you can save $50 or $100 every month, you can start making your savings a financial priority and grow your savings into a balance you can be proud of.
- Not Investing for the Future
Due to the lack of investment knowledge and belief that their finances are insufficient, Generation Z has been slower to enter the investing game than previous generations. Young Canadians may not see the financial impact of not investing right now, but it could cost them in the long haul.
If you are in your early 20s and earning more money than in your student days, now is the perfect time to get on the investing bandwagon! By investing early on in life, you can take advantage of compound interest, which means more cash in your pocketbooks to reach your financial goals. So rather than holding off on investing, familiarize yourself with the diverse range of investment vehicles (mutual funds, ETFs, stocks, etc.) or speak with a financial advisor as early in life as possible to help empower your financial knowledge and help you determine the right investment mix to feel confident about your finances now and in your retirement years.
- Falling Victim to Lifestyle Creep and Raising Your Debt Load
Want more than you have, or trying to keep up with the latest trends? That’s human nature. From five-star dining experiences to splashing cash on high-priced Europe trips, for Gen Z, it’s all about living in the moment no matter the price tag.
With student loan balances and the high cost of living, these harsh economic circumstances have caused many Gen Zers to be quick to adopt a spend versus save mentality towards their finances. That’s because, in the early years of their career and earning a modest income, the hope of saving for the future when their finances seem barely able to cover the essentials might feel like more of a nice dream than a reality. But the financial decisions made today could significantly impact your financial outlook for years to come.
Take the time to create a comprehensive financial budget to help you reach all your short and long-term financial goals – whether it’s saving for emergencies, bumping up your personal savings, or saving for retirement. It’s also okay to treat yourself occasionally – just be mindful to stay within your determined budget. Ultimately, developing a personal budget will allow you the freedom to make lifelong memories in your younger years without compromising your future financial comfort. And as your income grows, take the time to re-evaluate your current budget to identify opportunities to increase your contributions to reach your financial goals faster. If you need a little help building a personal budget, there are some tips on our blog here.
- Not Monetizing Your Hobbies
Is your primary employer your only source of income? If that is the case, you may be unable to stretch these dollars to cover all your essential expenses and enjoy leisure activities with friends. If you are looking for ways to boost your bank account, now is a great time to hop on the side hustle bandwagon!
With the rise of the gig economy, there are many financial opportunities that young Canadians can explore to add more cash to their pocketbooks. If you are skilled on the road, consider registering as an Uber or Lyft driver or turning your love of knitting into a business venture by selling your creations to users on Etsy. Establishing a new stream of income can help you increase your cash flow, pay off your outstanding debt, add to your savings, and, most importantly, bring you one step closer to achieving financial stability.
- Depending on Social Media as their Primary Source of Financial Knowledge
From dating advice to clothing trends, Gen Z actively turns to the online world to get guidance on every aspect of their lives – including answers to their pressing financial questions. But while financial social media influencers can be a helpful first step in your financial education, they should not be your only source of information on investments and the financial basics. While there are legitimate “finfluencers” out there, there are also an array of unqualified online sources that young Canadians could potentially turn to that could put their financial future at risk.
So, where can you access reliable financial advice to help you build your financial roadmap to a brighter future? While online sources are a great start on your financial journey, it’s important to speak with a licensed financial advisor in person or over the phone before making any significant commitments to your finances. That’s because, unlike online resources, speaking with a financial advisor offers you a personalized approach to financial advice, as these professional experts can tailor their financial advice to meet your individual short and long-term financial needs.
Get Your Financial Future on the Right Track with the help of Credit Union
From a lack of savings to lack of fundamental financial knowledge, Gen Zers in Canada are guilty of a few financial mishaps that could put their financial futures behind the eight-ball. But not to worry. Whether you want to develop healthy savings habits or obtain investment advice, Canada’s credit unions are a great financial partner to help you take charge of your finances. Find your nearest credit union, here.