If someone handed you $500, what would you do with it?

A whopping 70 percent of those in Generation Z say they’d save at least part of it, and among them, 34 percent would save it for college. That’s just one of the findings in TD Ameritrade’s 2nd Annual Generation Z Survey that shows that teens and early 20-somethings* are refreshingly money-savvy. Although they haven’t got it all figured out just yet.

Affording higher education

Almost half (46 percent) of those in Gen Z say their biggest financial concern is that they’ll be drowning in student debt after graduation. And they have reason for concern. The cost of a college degree has increased 1120 percent in the last 35 years, “four times faster than the increase in the consumer price index,” according to Bloomberg.

So how does Gen Z plan to pay for college? Those surveyed plan to fund their education in a few ways:

  • 68 percent plan to get scholarships and grants to help cover costs

  • 55 percent will rely on some help from their parents

  • 46 percent will cover expenses themselves, using savings or money earned while working their way through college

  • 44 percent plan to get student loans

“I am paying for college by whatever Pell grants I qualify for, and the rest I pay on student loans,” says Tiffany, a college student in Austin, Tex. “I was actually fortunate enough to have a college fund, and I used that to pay for most of my college. However, when I switched to an online university, my college fund would not cover it, so I am responsible for paying for the rest of my schooling.”

And despite of the soaring costs of a college education, 72 percent still plan to attend college or are currently enrolled in college, and 61 percent intend to get an advanced degree. Only 1 in 5 have considered putting off school due to the expense.

Living with your parents (but not for the rest of your life)

Ideally, those in Generation Z want to be living on their own by the age of 21, although 63 percent say that they feel they’d be welcome to move back home if they couldn’t afford their own place.

And most don’t view it as such a bad thing. College grads currently living at home or planning to do so cite two major benefits:

  1. 81 percent say it allows them to save money

  2. 48 percent say it allows them to be more selective about career opportunities

That could be scary news for parents hoping to turn their kid’s bedroom into a cardio theater. One famous member of Gen Z recently joked that he planned to live at home well into his 40s:

But Gen Z doesn’t plan to live at home forever. There’s a point where the embarrassment factor kicks in and outweighs the perks. And according to the survey, that point is age 28, on average. By age 25, 49 percent would be embarrassed to live at home, and by age 30, that figure jumps to 88 percent.

The key to fleeing the nest sooner rather than later is employment. According to the survey, Gen Z kids who have been or currently are gainfully employed are less likely to move back home after college.

But even with a job, Tiffany can’t afford independence. Her retail job of eight years doesn’t pay enough to cover her expenses. “I have a car payment, car insurance, a cell phone bill and a storage room that I have to pay for monthly,” she says. “Not to mention gas, groceries, living expenses. It’s just more practical to stay with Mom and Dad right now — no rent!”

Realistic salary expectations

I had a boss who was interviewing accountants for an open position. “All these kids think that they can graduate and make $50,000?!” he said, clearly annoyed. But that’s actually the average starting salary for accounting graduates. His salary expectations for the position were out of touch with reality.

But Gen Z is realistic about average starting salaries. They anticipate a $36,900 average starting salary, which is a conservative figure compared to the $44,000 average starting salary that 2012 grads made, according to the National Association of Colleges and Employers.

“The [journalism] jobs that I hope to apply for in the future…have a starting, entry pay anywhere between $21,000 and $39,000, and I have even seen a few go up to $45,000,” says Tiffany. “It’s enough to live on, but not enough to be extravagant, which works for me. As long as I can get paid to do what I love, at the end of the day, that’s what matters more than the money.”

And most of Gen Z agrees with that sentiment. Equally if not more important than salary is job satisfaction, say 77 percent of Gen Z. In fact, 44 percent are willing to move just about anywhere to take a dream job.

Retirement savings plan falls short

When asked about how they see their lives unfolding, Gen Z saw it playing out like this:

  1. Get a job

  2. Buy a car

  3. Pay off student debt

  4. Get married

  5. Buy a house

  6. Begin saving for retirement

  7. Have kids

The big problem with this life plan is that saving for retirement needs to be higher on the list. Most plan to start saving at age 28, but they need to start saving as soon as they start working.

Tiffany is ahead of the curve when it comes to retirement. “I have a small 401K account that I started with my current job, where a small percentage of my check goes into it, which is later matched by the company,” she says. “I started paying into that at age 25. I am well aware that what measly funds are in there now are not going to be enough to live on for more than a few months, but it’s a start! As soon as I can get myself into my career field, where I will be making a substantially larger amount of income, I plan to increase the percentage of funds going into it.”

High five to Tiffany!

Carrie Braxdale, managing director of investor services at TD Ameritrade, would agree: “Time and time again we hear Baby Boomers say they wish they would have started saving earlier,” Braxdale said in a press release. “And the hope is that we can spread the word to Gen Z to start saving as soon as they start working, rather than waiting until they reach other milestones. Even a little bit can go a long way, and the power of compounding interest is an opportunity they do not want to miss out on.”

*There’s some disagreement as to exact birth dates of the generation, but the survey polled teens and adults in their early 20s. There’s also some disagreement as to what to call this generation. “Some might call Gen Z — a term still in-the-running for the next generation — rather off-putting,” writes Bruce Horovitz in USA Today.

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