Inflation, rising interest rates and high costs for college tuition and homes have had a profound impact on Gen Z and how they approach investing, a new U.S. Bank survey found.
Key Takeaways
- Facing inflation, high-interest rates and high college tuition, most Gen Zers are unsure about beginning to invest.
- Younger investors are willing to accept lower returns if it aligns with their values and beliefs.
- Half of all investors feel overwhelmed and more pessimistic than last year.
Members of Gen Z, who range in age from 18 to 26, are more prone to compare their financial progress to others, such as their parents, people they see on social media, and people better off than they are.
Younger generations have inherited a different world than older generations, said Gunjan Kedia, vice chair of Wealth, Corporate, Commercial and Institutional Banking at U.S. Bank in a statement. Since 1980, college tuition has increased by 169%, the average home price is up 540%, and average student-loan debt now sits at $37,000, he said.
“It’s no wonder they are unsure about beginning an investing journey,” said Kedia in a statement. “But despite these headwinds, they are passionate about investing in causes they believe in and are seeking financial guidance.”
Most Gen Z and Millenial investors say social media posts and influencers make investing look easy, but that is not necessarily translating to their own lives, where 73% of Gen Z and 70% of Millenials aged 27-42 investors still don’t know where and how to begin investing.
Gen Z investors are also highly motivated by success, experiences, passions, and pursuing personal interests and opportunities. Whereas Boomers primarily associate wealth with financial security and stability for their future. Investors across generations prioritize financial security as the top motivator.
The survey found that younger generations are willing to accept lower returns on their investments if it aligns with their values and beliefs. Separately, 65% of Gen Z and 59% of Millenials are motivated by financial gains and passionately invested in supporting causes they care about. Only 45% of Gen X and 30% of Boomers are motivated to invest in causes they care about.
More than half of Gen Z and Millennial active investors say they will only invest in businesses that take a public stance on certain issues versus 38% of Gen X and 28% of Boomers.
Younger generations are ready to put their money where their mouths are—even if it means they’ll have less of it. Over 8 in 10 aspiring investors, Gen Z and Millenials, say they would accept a rate below 11.9% on their investment—less than the average return of the S&P 500—to support investments they believe in.
Across generations, the survey found investors are actively adapting their investment strategies in response to the economic climate. The top concerns among active investors include inflation, recession, rising interest rates, Social Security running out of money and the U.S. dollar collapse.
More than two-thirds of aspiring investors feel negative emotions when thinking of beginning their investing journeys, citing feelings of being overwhelmed by everything happening in the world and recent economic events making them question what investment approach to take.
More than 1 in 4 active investors say they are doubtful they can meet their investment goals.
The U.S. Bank survey pulled data from 3,000 active and 1,000 aspiring investors of all generations. The survey was conducted May 12-24.