Gen Z Workers Take Different Investing Approaches Than Older Generations

Generation Z retirement plan participants have received the message that time is an ally for retirement investing, increasing their rate of contributions to retirement plans more than Gen Xers and Millennials, data from the year’s second quarter shows.

Generation Z is also using mobile technology and following financial influencers online for advice and varying investments are owned by each generation, according to research on the same cohorts from the Financial Industry Regulatory Authority’s Investor Education Foundation and the CFA Institute.

Retirement plan participants in Gen Z increased their deferrals at a higher rate than Millennials and Gen Xers, according to separate Q2 research from Bank of America, FINRA and the CFA Institute.

Generation Z consists of individuals born after 2000; Millennials of those born between 1981 and 2000; and Generation X of those born between 1965 and 1980.

Among Gen Z investors, more than half (55%) are invested in cryptocurrency, 41% in individual stocks and 35% in mutual funds. Among Millennials, 57% own cryptocurrency, 38% own individual stocks and 43% own mutual funds. In Gen X, 39% of investors own cryptocurrency, 43% own stocks and 47% own mutual funds, the FINRA and CFA data showed.

“These new entrants to the world of investing are reshaping investment practices, products and platforms,” said Paul Andrews, managing director for research, advocacy and standards at the CFA Institute, in a press release issued with the findings. “A range of macroeconomic and social factors such as rising inflation, the growing popularity and accessibility of cryptocurrency and social media ‘finfluencers’ are having a profound impact on how, where and what they invest in.”

Almost one-quarter of Gen Z investors (23%) have invested in exchange-traded funds, compared to 26% of Millennials and 22% of Gen X, the data showed. Meanwhile, 25% of Gen Z owned non-fungible tokens, compared with 28% of Millennials and 15% of Gen X, FINRA finds.  

“The Gen Z population is diverse and digitally savvy,” said FINRA Foundation president Gerri Walsh in the press release. “They are using mobile technology to enter the financial markets in unprecedented numbers and consulting a wide range of information sources as they do so. It is vital to understand their investing decisions and to provide them with the educational tools to prepare for those decisions.”

The FINRA foundation and CFA Institute report also found that 48% of Gen Z investors used social media as a preferred information source for investing and financial topics, compared to 42% of Millennials and 26% of Gen X. Internet searches and general websites, on the other hand, were more often referenced by older participants, used by 53% of Gen X investors, 49% of Millennials and 47% of Gen Z. The newest group of investors relied heavily on and parents and family members as sources of advice at 45%, a contrast from Millennials (28%) and Gen X (27%).

In Q2, more overall participants across all age groups increased their contribution rate (10.2%) than decreased (2.2%), Bank of America data showed.

Among Gen Z participants in Q2, 19.3% increased their contribution rate to a retirement plan, as compared with 2.6% who contributed less. For Millennials, 11% increased their contribution rate and 2.6% of that cohort decreased contributions. Among Gen X participants, 9.7% increased their contribution rates, a BofA spokesperson said by email. Bank of America did not provide a figure for the corresponding Gen X deferral cuts.

Overall, retirement plan participants’ average account balance reached $82,300 at the end of June, compared with $75,000 at year-end 2022, the Bank of America report found.

The BofA pulse report monitors plan participants’ behavior in its recordkeeping clients’ employee benefits programs, which comprise more than 4 million total participants with positive account balances, as of June 30.

The total sample size for the FINRA / CFA study was 2,872, comprising Gen Z, Millennial and Gen X investors. Data were collected in November and December 2022, and respondents were contacted using a combination of Schlesinger’s proprietary online panel and social media advertising on TikTok and Instagram. Individuals agreed to participate and were compensated for completing surveys.