6 Money Management Tips Tailored for the Gen Z Crowd

Each generation has its traits that define them. Generation Z, those born after 1995, has been referred to as “digital natives” or the “internet generation”. They grew up surrounded by computers, smartphones, the Internet, social media—they had unprecedented connectivity.

This is also the generation that grew up watching their families struggle through events like the Great Recession, stagnant wages, and a housing bubble that had burst.

These uncertain economic conditions taught them to be more resilient with money and shaped this generation’s unique approach to personal finance, including their spending habits and attitudes towards money and debt.

Each generation handles money differently: The boomers are saving for retirement and generally have better liquidity by virtue of their age; millennials are learning to correct the financial mistakes of the past, while Gen Zs are savvier with their savings to avoid the mistakes of their elders.

Could Gen Z potentially be the most sophisticated of all these recent generations?

Generations Z stereotypes

  • Tech-dependent
  • They are in it for the experience; they’re not just acquiring things
  • They are less loyal to brands and are focused on their authenticity
  • They prefer digital communication
  • They are harder to reach because of their short, “eight-second” attention span

Source: Deloitte

By 2025, Gen Zs will make up a quarter of the Asia–Pacific (APAC) region’s population —equaling the population of Millennials, according to McKinsey.

And unlike predecessors, they aren’t as convinced of a college education. According to a study by Nielsen, about one in five Gen Zs say they may choose to skip college. Many others see a “less conventional path through education” as a good idea.

Over 30% of Gen Z said they have considered taking a gap year between high school and college. These findings are not surprising considering the rising tuition costs in recent years.

A study by Raddon revealed that 2/3 of a group of 2,500 teens had already opened a bank account and were as much as three times more likely to take on financial loss than millennials were.

In Singapore, Gen Zs are found to be savvier than their millennial counterparts, according to a new survey by personal finance website SingSaver, which analyzed 1,000 responses from these two demographics within Singapore.

About 39% say that retirement is their biggest motivations for investing, while their top three investment products are stocks and bonds (59%), real estate (41%) and mutual funds (35%).

Read more: Saving for Retirement: Raised CPF Basic Retirement Sum & What It Means for Millennials & Gen Zs

6 financial tips for Gen Zs

Do not underestimate the importance of a healthy credit score

Having a good credit score goes a long way. It opens doors to many good things in life—a higher chance of qualifying for loans, competitive loan interest rates, a higher limit on your credit card, and even better negotiating power.

It will come particularly handy when you are taking on a bank loan. Lenders will first refer to  your credit score, which is calculated in your credit report. Ideally, you get a credit risk grade of AA as that will make it easier for you to qualify for a loan.

According to DBS, in Singapore, your credit score is a number between 1,000 and 2,000 – with those on the lowest end of the scale having the highest risk of defaulting on a payment, and are rated HH.

Those with 2,000 points or the highest end of the score range are perceived to have the lowest risk, and are in the position to enjoy the best credit rating of AA.

Of course, your credit score is not the only factor that lenders will consider when making lending decisions. They may also include your annual salary, length of employment, litigation information or history of bankruptcy.

Read more: Beginner’s Guide to Building Your Credit Score in Singapore

Learn to budget properly — and stick to it

Keeping your money in check is not an easy task. Just about anyone can start the month with good intentions of either saving money or adhering to a budget—but not many have the discipline to stick to their plans.

Sometimes, to achieve certain financial goals, one must sacrifice luxury over practicality. Start with only buying what you need, avoiding sales displays, and monitoring your spending more closely.

Get the ball rolling by figuring out what your true spending habits are. On top of that, when balancing the books, make sure information on your income, expenses, debt payments and spending are all computed correctly.

Pro tip: The Planner Bee app is perfect for doing this!

You’ll need to learn the art of delayed gratification as it is a key component to helping you to keep your finances in order. You’ll also need to find the time to think about your financial future and how much money you will need before retiring.

Investing young helps you achieve your goals faster

Though it may sound counterintuitive, investing in your 20s will put you in a prime position to grow your investments faster, despite the low salary and college debt.

The younger you are, the more time you would have to grow your money. A little goes a long way, especially with the help of compound interest. With as little as S$300, you can start investing in robo-advisors. So, start early to enjoy the perks of financial freedom later in life.

But before you pour your money into investing, just make sure you have a solid emergency fund of three to six months’ worth of living expenses and that you have cleared all your high-interest debts (credit cards are a big one).

Pro tip: You can calculate your emergency fund easily here

Financial tools like credit cards and personal loans are not evil

Though many people are fighting and struggling to get out of debt, not all debt is bad for you. Some debt helps you get ahead of life, while others are bad for you. When assessing your creditworthiness, lenders will typically look at your credit report to evaluate your debts to see if some are more favourable than others.

Personal loans can help you pay off other high-interest debt, consolidate your credit card debt and help you finance a big purchase. Credit cards come with rewards in the form of points, miles, and cashback.

Many people have travelled the world for cheap because of taking advantage of these rewards. Plus, we believe that if you will be spending anyway, you might as well earn points and get rewarded for it.

Ultimately, both tools help improve your credit score, which is how most systems in the world evaluate financial health. So, better to start building a good credit history before you need it.

Build your savings and emergency funds—they are different!

Sometimes, life throws you a curveball, and unexpected expenses like an accident force you to dip into your pockets.

When this happens, having ample funds in your savings and the emergency fund will help. But is there a difference between the two? And which should you prioritise first?

Let’s start by defining and specifying the differences between the two. An emergency fund typically consists of funds for unexpected circumstances such as job loss, illness, accidents etc.

An emergency fund typically consists of funds for unexpected circumstances.

You should at least have 3-6 months of funds to avoid a possible meltdown if unforeseen circumstances happen. Having an emergency fund helps you sleep at night knowing that you’ll be covered in the majority of cases.

A savings fund, on the other hand, is typically a fund that you use to save for a specific goal. This could be a down payment on a car or home, appliances, furniture, and investments etc. These are planned expenses.

Choose quality over quantity

Choosing quality over quantity lets you weed out the things that are unnecessary or unimportant, allowing you to focus on what truly matters. It also means preferring better things rather than more things.

More money, more clothes, and more friends won’t necessarily fulfill you. Instead, it’s about the quality of what you have or how you utilize what you already have that matters.

Like friendship, it would be better to have meaningful and fulfilling friendships than to have all the friends in the world or on social media.

From a materialistic point of view, would you truly be happy if your joy is based on a constant desire for more new things? It could be. But as we get older, we often become less interested in buying new things and would prefer to stick to what works.

As we get older, we often become less interested in buying new things.

But to get the best, you’ll need to put in effort and time for it. There are a lot of reasons why choosing quality over quantity is a good idea; for one, choosing quality saves us time, money, and is more sustainable.

At the end of the day, all the choices come together to create the person you are today. So always take your time to choose wisely.

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