Generation Alpha: The Financial Revolution Awaits
Building on Gen Z's blueprint, credit unions must gear up for the next generation born between 2010 and 2024, which includes learn and work from home, digitally savvy COVID kids.
By Tanya Van Court, CEO/Founder, Goalsetter
August 24, 2023
Generation Z transitioned from childhood to adulthood in the most unprecedented of times and stood as both witnesses to and victims of the profound societal impacts of COVID. It wasn’t just about the physical health crisis that COVID presented. They witnessed the effect of a worldwide pandemic and economic turmoil on their family’s finances, and the corresponding toll of financial uncertainty on their parents’ mental health and emotional wellbeing. Family financial conversations were suddenly becoming serious dinner topics, and their exposure to their parents’ financial vulnerability was more raw and unfiltered than ever before.
With a fierce determination to do things differently, they're reimagining the very frameworks that they see as failing them and our nation, including the fundamentals of how they bank, how they invest and how they see money itself. The financial paradigm shift that Gen Z unleashed is impossible for banks, credit unions and other traditional institutions to ignore. As Gen Z continues to lay down this disruptive blueprint, making way for the 2-billion-strong Gen Alpha, financial institutions must pay attention and prepare for a generation that is more digital, global, social and visual than any of its predecessors.
Gen Z's Financial Playbook Is Still Being Written, But Its Impact Is Undeniable
Generation Z is the youngest generation of adults, born between 1997 and 2013. According to a Deloitte study, their longer-term financial futures, day-to-day finances and the health/welfare of their families are top stress drivers. For this reason, they are more financially aware and active than generations before them, and their financial acumen is evidenced by the following key findings.
Gen Z Shakes Up the Investment Landscape
Gen Z isn’t just stepping onto the investment scene – they're storming and transforming it. By the time many of them turned 18, they had already dabbled in the financial markets. An impressive 54% of Gen Z, according to Investopedia, have ventured into investments – from traditional vehicles like mutual funds and ETFs to trendier, riskier instruments like cryptocurrencies and NFTs. Investopedia also found that, notably, a quarter of them have purchased stocks, due in part to the ubiquity of fintechs that make online transactions easily accessible with minimal initial investment requirements.
Gen Z Saves More Than the Generations Before Them
Gen Z is setting a new savings benchmark. The TransAmerica Center for Retirement Studies reveals that, even as the youngest earners, Gen Z displays a pronounced commitment to future security. Per Transamerica , a striking 30% are placing retirement on their priority list, and of those offered a plan, a robust 67% are actively contributing. Contrast this with the savings landscape of preceding generations: Baby Boomers at a median of $162,000, Gen X at $87,000, and Millennials at $50,000. The study also found that Gen Z stands apart from other generations, earmarking a commendable 20% of their salary for their 401(k) or a similar plan. This forward-thinking generation isn't just saving; they're beginning this journey significantly earlier and more deliberately than their predecessors.
Gen Z Craves a Holistic Approach to Money
According to a trends report by The Financial Brand, Gen Z isn't just looking for financial services – they are seeking financial well-being, a concept that they equate with mental and emotional well-being. For that reason, they crave personalized finance tools that aren't just transactional, but are transformational. This generation does not want to be sold – they are hungry for education and advice from authentic sources, viewing financial literacy not as a luxury, but a necessity. Gen Z is sending a clear message: They want knowledgeable, trusted partners in financial empowerment.
Gen Z Scrolls on Social Media for Financial Wisdom
Classrooms traditionally shape knowledge, but Gen Z's financial education is coming from their screens, even as traditional education has sidestepped providing curricula to address crucial financial topics. The result? According to a GoBankingRates survey, 38% of Gen Z turns to social media for financial insights (led by TikTok,cited at 34%). In stark contrast, only 17% are getting their knowledge from formal educational settings. A Credit Karma study paints a similar picture: a substantial 56% of both Gen Z and Millennials actively hunt for financial advice online or via social platforms. The downside is that only 46% of Gen Z feels confident in their financial acumen, and they know there is an inherent risk of misinformation when their primary financial education sources are TikTok and unvetted social influencers. In this age of information saturation and Gen Z social media users digesting hundreds of pieces of content every day, discerning facts from falsehoods remains a challenge. The digital age's promise: endless information.
The Future of Banking: Digital, Social, and Led by Gen Z and Alpha
A seismic shift is underway through the financial sector. With 4 million digital-first Gen Zers projected to open bank accounts annually until 2026, per Insider Intelligence, and 2-billion-strong Gen Alpha right around the corner, there is no going back to traditional banking. Gen Z has laid the blueprint, and Gen Alpha will take it to the next level. Gen Alpha’s elementary classrooms were virtual, their baby albums were dynamically generated iPhone reels, and their Millennial parents – struggling with Covid restrictions and Zoom calls – depended upon tech to help raise them. For many of them, their first allowance was digital and they began using digital payment mechanisms earlier than any previous generation.
The data is clear: for Gen Z, mobile banking is crucial. Insider Intelligence also found that a substantial 55.7% of them rank it as their top consideration when choosing a bank, noticeably higher than the overall average. It's not just a slight preference either; it beats their second major concern, fees, by a significant 12.2 percentage points. There is a real possibility that Gen Alpha will never set foot in a physical branch, and will happily default to conducting all of their financial business through their aluminum and lithium phones, rather than through a brick and mortar building.
The real game-changer, however, is Gen Z’s symbiotic relationship with social media. This generation devours media with an appetite that's unprecedented: Per Insider Intelligence, 42.1% of Gen Z engage with digital platforms, including video, for 1-3 hours daily, and another 30.8% extend that to 3-5 hours. Personalized, on-demand content isn't just preferred; it's expected. Based on that trend, we believe Gen Alpha will exceed these numbers significantly.
Gen Z's Financial Blueprint: A Challenge and Opportunity for Institutions
Gen Z has unleashed a transformative change in the financial services landscape, and the industry must respond with innovative, impactful and powerful solutions to attract and retain the next generation of credit union members. To truly connect, it's essential to speak Gen Z's language and to engage them seamlessly in their digital world. This isn't just about information – it's about immersive, meaningful engagement, ensuring that credit unions can intimately and authentically resonate with younger consumers.
In the face of Gen Z's paradigm shift and Gen Alpha’s proximity, forward-thinking financial institutions must innovate and implement transformative solutions that will allow them not only to adapt, but to lead and win the hearts and minds of the youngest members.
Connect with Goalsetter to learn more.
Originally published on CUInsight, August 2023
Founded by Tanya Van Court in 2016, Goalsetter is an education-first family finance and technology platform offering credit unions a 360° solution for reaching their next generation of members. A former Nickelodeon and Discovery Education executive, Tanya had a long career trajectory in creating digital products, but it wasn't until her 8-year-old daughter asked for an investment account and a bike for her ninth birthday that she realized her true calling. In that moment, she knew if she could get every kid in America to become a saver and investor instead of a consumer, she could change the world. And so, Goalsetter was born.