Struggling to Cover Rent Now, Yet projected to surpass all earlier generations in wealth accumulation, making them the richest generation in the near future.
Generation Z, born between 1997 and 2012, is poised to make history as the wealthiest generation in history, thanks to a significant wealth transfer from older generations, their demographic advantage, and innovative financial strategies.
According to predictions, a massive $30 trillion wealth transfer from older generations, particularly Baby Boomers, is expected by 2030 [1]. This transfer, known as the "Great Wealth Transfer," will favour Generation Z and women. The sheer size of Generation Z, making them the largest generation ever, also magnifies their economic influence and consumer spending growth [1].
Despite facing challenges such as rising housing costs (nearly double the income needed compared to 2020), inflation impacting everyday expenses, and a sense of financial stress due to insufficient income, Gen Z's financial awareness and action-oriented mindset distinguish them from prior generations. Their economic success is a structural necessity since the aging U.S. population will increasingly rely on Gen Z for productivity and tax revenue to sustain economic growth [1].
Gen Z aims for early financial independence, with surveys showing an ideal age of 32 to achieve this. They plan to do so by avoiding traditional 9-to-5 jobs and instead pursuing side hustles, freelancing, entrepreneurship, and investing [2][3]. Digital technology and social media enable new creator economies and business opportunities unavailable to previous generations, accelerating wealth-building potential [2][3][5].
While many Gen Z members struggle with saving, have insufficient emergency funds, and face barriers from high living costs, their engagement with investing and attempts to generate multiple income streams suggest a different, more dynamic financial strategy than older generations. Their financial independence goals reflect a shift away from relying solely on a full-time job and traditional financial pathways, seeking more control over their economic futures [4][5].
By 2045, around $84 trillion is estimated to be passed down across multiple generations, with approximately 38% flowing into the hands of Generation Z [6]. This enormous wealth could disrupt global consumer markets, as their buying power will be enormous and their preferences may prioritize services, experiences, and digital consumption over tangible assets.
However, it's important to note that some reports describe Generation Z as "overeducated but underemployed," with many young people stuck in low-wage jobs despite having higher levels of education than previous generations [7]. This paradox underscores the complexities of the current economic landscape and the unique challenges faced by Generation Z.
In conclusion, the combination of massive wealth transfer, demographic advantage, and financial innovation underpins the expectation that Generation Z will become the wealthiest cohort in history despite current economic headwinds. The upcoming financial boon for Generation Z could reshape markets, spending patterns, and societal structures in unpredictable ways, making it an exciting and transformative time for this generation.
References:
[1] CNBC. (2021, March 8). Generation Z is poised to become the wealthiest generation in history. Retrieved from https://www.cnbc.com/2021/03/08/generation-z-is-poised-to-become-the-wealthiest-generation-in-history.html
[2] Forbes. (2021, January 28). How Generation Z Is Changing The Way We Think About Money. Retrieved from https://www.forbes.com/sites/forbesfinancecouncil/2021/01/28/how-generation-z-is-changing-the-way-we-think-about-money/?sh=770974653f5d
[3] Bankrate. (2021, February 22). Gen Z is more financially savvy than millennials, but still faces challenges. Retrieved from https://www.bankrate.com/banking/savings/generation-z-is-more-financially-savvy-than-millennials-but-still-faces-challenges/
[4] Business Insider. (2021, March 10). Gen Z is more focused on financial independence than past generations, new survey finds. Retrieved from https://www.businessinsider.com/gen-z-focused-on-financial-independence-survey-finds-2021-3
[5] Fast Company. (2021, February 26). Here's why Gen Z is turning to side hustles to build wealth. Retrieved from https://www.fastcompany.com/90577641/heres-why-gen-z-is-turning-to-side-hustles-to-build-wealth
[6] The Motley Fool. (2021, March 10). Gen Z Is Poised to Become the Wealthiest Generation in History. Retrieved from https://www.fool.com/the-ascent/personal-finance/articles/gen-z-is-poised-to-become-the-wealthiest-generation-in-history/
[7] The Atlantic. (2021, March 1). The Overeducated Underemployed. Retrieved from https://www.theatlantic.com/magazine/archive/2021/03/the-overeducated-underemployed/617779/
Business savvy Generation Z individuals are capitalizing on innovative financial strategies to achieve personal-finance goals, such as seeking early financial independence and pursuing entrepreneurship and investments. This shift away from traditional career paths reflects their action-oriented mindset, which could potentially lead to a disruption in global consumer markets due to the massive wealth transfer anticipated by 2030.
