How Gen Z and Millennials Differ Financially

Gen Z may not have started to amass much wealth yet, but establishing a relationship with them now is key for financial institutions to create long-term customers. But they shouldn’t assume what did (or didn’t) work with Millennials will be the same with Gen Z.

Much like Captain Ahab chasing the white whale, or Don Quixote tilting at windmills, banks and credit unions spent the better part of a decade searching for what exactly Millennials wanted from a financial institution. Millennials — the first generation to grow up with an inherent comfort level with the digital world — were said to want robust mobile banking apps and preferred community institutions to megabanks. Unless, of course, they actually liked the comfort of having a branch nearby, and appreciated the robust tech offerings of big banks.

Ultimately, financial marketers came to realize that with such a huge generational group, there were many nuances and that relying on generational stereotypes was likely to be misleading.

With the oldest Millennials approaching 40, financial institutions now have another opportunity to reach the next generation at an early stage (not abandoning earlier generations in the process, of course). Gen Z is roughly defined as those born in 1997 or later, according to the Pew Research Institute.

Like the Millennials of a decade ago, this younger cohort may not have started to amass much wealth, but establishing a relationship with them now is key for banks and credit unions to creating lifelong customers. But they shouldn’t assume what did (or didn’t) work with Millennials will be the same with Gen Z.

Tap Into The Power of Crowds

Perhaps more than any other generation before them, Gen Zers rely on the opinions of crowds to make financial decisions. Witness the Reddit-fueled rise of GameStop shares and the price of Dogecoin in recent months. A survey by found that nearly 30% of Gen Z consumers use Reddit to make financial decisions. Millennials do even more so, so there’s one of the similarities between the generations. Both are very comfortable using social media in general to make decisions about finance.

According to Jeff Fromm and Angie Read, authors of “Marketing to Gen Z: The Rules for Reaching This Vast — and Very Different — Generation of Influencers,” “Generation Z crowdsources their purchasing decisions and seeks the opinion of their peers before (and after) buying.”

For banks and credit unions that still rely on direct mail as part of the marketing mix, reaching this demographic may sound daunting. But the key is to focus on being informative and authentic. You don’t have to be cool, just helpful.

“Come from an authentic place and try to integrate as naturally as possible into their lives,” says Scarlett Sieber, Chief Strategy and Growth Officer at Money 20/20. “Partner with brands and personalities that resonate with [Gen Z] as opposed to the traditional way of thinking. Show how through financial products, people like them have improved their quality of life. The best way to market to anyone is naturally through word of mouth,” Sieber continues. “Offer an enhanced, integrated experience that tailors to their needs and they will market the product for you.”

Food for Thought:

Gen Z consumers rely heavily on their peers for financial information. They also don’t want to feel marketed to, but they respond to genuine communications.

Since Gen Z is quick to not only look to each other for advice but also spread the word of a quality product or service, this should encourage banks and credit unions to effectively market to this demographic.

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PFM: A Thing of the Past?

Perhaps the most common refrain heard about Millennials is that they loved budgeting and personal financial management apps. Many experts said having such tools and products were essential to attracting them as customers.

It turns out that Gen Z may not feel the same way. A survey from Laurel Road found that 22% of Gen-Z use personal finance apps, compared to 42% of Millennials. Further, the survey found that only about a fifth (19%) of Gen-Zers use digital spreadsheets for financial management versus a third (32%) of Millennials.

This provides a keen opportunity for banks and credit unions. Not to offer up another budgeting tool no one will use but rather offer financial advice and help Gen Z achieve financial literacy. It’s something they are looking for.

Key Takeaway:

Gen Z is keenly interested in learning about finance and seeking help with financial literacy.

53% of Gen Z respondents in the Laurel Road survey say they believe they can improve their financial literacy but don’t know how. Improving financial literacy is an actionable step that financial institutions can take to create loyal, longtime customers.

Read More: Gen Z Says They’re Eager to Use Big Techs for Banking – But Will They?

Down with Debt?

Another reason Gen Z is less eager to use budgeting apps than their Millennial counterparts is because they have less debt to manage. For example, the average Gen Z consumer has 2.2 credit cards, lowest among any generation, according to The Ascent. Millennials, by contrast, have an average of 2.7 cards, while Baby Boomers have the hightest average, at 2.9.

Gen Z in general are much less likely to take on debt of any kind than Millennials and have less debt on average. Of course, that is largely due to being younger — some still in high school — but many in Gen Z are also very cautious. They see how Millennials took out massive quantities of student loans that are still being repaid a decade or more later. For many young adults, this means making different choices about college itself compared to older generations.

“As college expenses continue to rise at a rate that’s greater than inflation and student debt is reaching record highs, young Americans are beginning to change how they are thinking about college,” Dara Luber, senior manager of retirement product at TD Ameritrade, told GoBankingRates. “Young Americans are concerned about college costs and the debt that they may incur, [and] they are looking at a number of alternatives to college.”

The Skinny:

Gen Z does not look at a college degree as the be-all, end-all and are not as quick as Millennials to jump into student loan debt.

Overall, Gen Z takes a much dimmer view of debt than Millennials, or any other prior generation. Growing up in an economic downturn has made them financially cautious and they “want to save and avoid debt, and are already starting to invest and think about retirement,” states an article by Credit Suisse.

The ‘Digital-First’ Generation

Technology is important to both Millennial and Gen Z consumers, but for Gen Z that attitude is “digital-first,” not digital as supplement to other channels. Whereas most Millennials probably have written a check or entered a bank branch at some point, to Gen Z these things are alien.

“The most obvious difference between the eras each generation was raised in is the presence of technology,” says a blog from Hubspot. “Millennials grew up using DVD players, giant personal computers, cell phones with tiny screens, and dial-up internet. At that time, we thought these technologies were groundbreaking.” Most members of Gen Z have access to iPads, smartphones, endless Wi-Fi, and streaming services, the blog continues.

Bottom Line:

Gen Z consumers won’t be impressed with run-of-the-mill digital features from their financial providers.

Banks and credit unions may have made some missteps in marketing to Millennials, but they can learn from those in their dealings with Gen Z. These can be customers for the next several decades, and should not be ignored.

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