Gen Z is changing the future of investing in today’s challenging landscape

August 01, 2023
Gunjan Kedia speaking to an audience
Gunjan Kedia, vice chair of Wealth, Corporate, Commercial and Institutional Banking at U.S. Bank, at a recent event discussing the Young Investor survey results.

By Gunjan Kedia, vice chair of Wealth, Corporate, Commercial and Institutional Banking

Gen Z and Millennial investors are having a profound impact on our society and on investing behavior.  

As a parent, I’ve had a front-row seat to observe a generation of young adults growing up in an economic environment marked by a pandemic, societal issues and an overload of information and advice from myriad new channels – unique challenges that were mostly unknown to previous generations.

In our work within Wealth Management, we at U.S. Bank know that many members of Gen Z are motivated to begin investing. We have a deep desire to understand the hopes and dreams and challenges of this generation so we can help them craft a plan that leads them to good financial outcomes. Many young investors started their journey in a period of unusual turbulence and we hope to encourage them to remain dedicated to beginning their investing journeys and take advantage of the powerful impact time can have on their investments and long-term financial security.

For all these reasons and more, in May U.S. Bank surveyed 4,000 active and aspiring investors across all generations to better understand how and why younger generations invest (or don’t invest). We found that members of Gen Z are overwhelmed by recent economic news, are unsure how to start investing, compare their financial progress to others, and are highly motivated by experiences and the pursuit of personal interests and opportunities.

Here’s a closer look at what we found.

Wealth holds different meaning for different generations

Wealth is a very personal concept and means something different to everyone – especially across different generations.

Among Gen Z, nearly 40% of active investors define wealth as a better quality of life. This, combined with the pursuit of personal interests and new experiences, drives many of Gen Z’s investment decisions.

Gen Z will sacrifice returns to invest in causes they believe in

More than 8 in 10 Gen Z active investors (85%) would accept a return below the average return of the S&P over the last 10 years if it reflected their values and supported causes they cared about.

This view is quite different than the Boomer generation; 35% of Boomers would not make an investment in something that aligned with their beliefs if it yielded a less-than-average S&P return.

Young investors lack confidence and fall victim to comparison

Our study revealed that wealth is a goal for the future, but many Gen Z’ers are unsure how to start investing.

Nearly 3 in 4 Gen Z (73%) and Millennial (70%) aspiring investors said they don’t know how to start investing, despite 3 in 4 Gen Z (78%) and Millennial (73%) aspiring investors saying that social media and influencers make investing look easy.

Social media can be a helpful tool for basic financial advice, but it can also lead to unrealistic expectations and pressure. Gen Z active investors are the most likely of any generation to compare themselves to people on social media (27%) when thinking about their own wealth and investment goals.

Financial advisors and institutions can guide Gen Z in the right direction

While Gen Z compares themselves to others on social media, they also use their parents (35%) and friends (34%) to benchmark their financial progress. Our survey also found that 50% of Gen Z are currently turning to their families for financial advice, while 36% turn to YouTube.

Despite the many potential sources of information and advice, this is a generation that values expertise. I was very encouraged to learn that nearly two-thirds (62%) of Gen Z trust financial advisors - significantly more than all other generations. It is vital that Gen Z take the steps to develop a plan that will work for them – and today, there are some great options to help them get started, including robo advisors. Financial professionals and professional advice – both digital and human – can help investors of all backgrounds face their financial fears and concerns.

Forging a better future for young Investors

Our goal with this survey was to better understand the next generation of investors and to offer advice and resources to help put them on the path to brighter futures. I am excited about the learnings we discovered and the solutions we are providing Gen Z and other generations to help achieve their financial goals. Personally, I am inspired by what Gen Z has set out to accomplish. Watching my sons and their peer group, I am proud of how these digital natives are eager to make a difference in the world. I am committed to doing everything I can to help give this next generation of investors the tools they need to make that happen.

Read the press release announcing survey results and find a copy of the full report here.

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