‘Gen Z’ is financially-savvy, with one big exception

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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Elizabeth
Elizabeth
6 years ago

Hmmm. You know what they say: “If you want to hear God laugh, tell him your plans.” There can be a huge disconnect between what people say in surveys and what actually happens! I also tend to be suspicious of research that comes from a financial institution. And why no mention of an emergency fund? Still, I think April’s point about not waiting so long to save for retirement is a good one. I’m certainly glad I didn’t wait for marriage, because we can’t exactly plan when our spouse will come along. IMHO, saving for retirement and for an emergency… Read more »

Tyler Karaszewski
Tyler Karaszewski
6 years ago
Reply to  Elizabeth

From the actual paper in the link:

An online survey was conducted among N=1,000 Americans aged 14 to 23

So, “gen Z” is 14-23 year olds here. No offense to anyone, but the future plans of 14-23-year-olds really aren’t worth the pixels they’re printed on. In five years almost none of them will be where they thought they were going to be.

Carla
Carla
6 years ago

I completely agree, Tyler. I was 14-23 at one time and my life today at 34 looks nothing like I thought it would look like. Those cookie cutter Disney Hollywood movie plans are so far from the norm, I think it does more harm than good to focus on to many pipe dreams. In their world there is no unforeseen illness, layoffs, recessions or general downfalls. Their own parents may have experienced this but they feel they are invincible – if only they do X, Y and Z.

Elizabeth
Elizabeth
6 years ago

Agreed! Life has a way of sending us surprises — good and bad. I’m definitely not where I thought I’d end up, which is why I was surprised there’s no talk of an emergency fund. I have a feeling that the survey didn’t ask about it?

That’s the one thing I hate about surveys — you can only answer the questions you’re given, often with only the options you’re given.

Janette
Janette
6 years ago

I agree—- what other advice do you think a financial institution would come up with?

I think that saving for pay off debts, emergency fund and then retirement should go full tilt until you marry. Then retirement might take a back seat in put put land until your family is established.
Don’t worry way too much. The idea of getting rich slowly is to enjoy some of the time you have when you are young.

Darlene with BlogBoldly
Darlene with BlogBoldly
6 years ago

“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.”

Yeah.. and look how far “having kids” is down the list. Kinda sad starting a family gets pushed so low as a priority.

~darlene

lmoot
lmoot
6 years ago

Why on earth is that sad? More people should do the same. It’s never a bad idea to want to be prepared before having kids. Just because it’s further down the list doesn’t mean it’s not important to someone…some may argue that it means it’s more important; more important that they don’t want to bring another needy, expensive human into this world without having the means to care for it.

On the flip side, why would having kids earlier be more virtuous?

Jeff
Jeff
6 years ago
Reply to  lmoot

Quite a number of us simply have little or no desire to be parents: this is something us and those who want kids will never see eye-to-eye on. Procreation is just very low on the totem pole of our goals. I have too many things I need and want to do now that a child would simply get in the way of. I have college loans to pay off. I have a car to pay off. I need a home of my own rather than to live with my parents. We hardly traveled as a family so there are many… Read more »

Jane
Jane
6 years ago

Sad is perhaps the wrong word. But I do think that if you want children and have met the right person with whom to have those children (two big ifs, I know), that it is better to have them sooner rather than later, even if it means delaying your retirement or other goals. The reality is that sometimes our bodies don’t always cooperate with our financial goals. I just would hate for someone to delay children for too long and then have problems conceiving or carrying a child to term. In the long run, this could sabotage your long term… Read more »

Alexis
Alexis
6 years ago
Reply to  Jane

I’m curious. Do you think we would/should move towards a multi-generational household structure so that there can be more adults at home to take care of kids, and so that housing per person becomes cheaper? Or will it become a parent’s job to finance all/most of their children’s higher education/housing down payment? Otherwise, with increasingly late retirement ages and increasingly large starting debts, I don’t see how people can afford to have children earlier. (I’ve read that early-mid twenties is the best time, but I don’t plan to have children until I’m at least 30. I don’t feel established at… Read more »

Jane
Jane
6 years ago
Reply to  Alexis

Alexis, maybe I’m being dim, but I don’t see the explicit connection between my comment and your broader questions. I guess you are asking me what steps I would suggest to make children more affordable for people in their twenties. I know the job market is pretty dire at the moment and the younger generations have loans up the wazoo. These are serious problems. I guess I just don’t think that kids need to be born into optimum financial circumstances for them or their parents to thrive. If this were the case, humanity would have probably probably disappeared a long… Read more »

stellamarina
stellamarina
6 years ago
Reply to  Alexis

Just keep in mind that a woman’s fertility rate starts going down once she hits 27 years old.

Alexis
Alexis
6 years ago
Reply to  Alexis

Jane, I can’t seem to reply to your comment, but yes, that is basically what I’m saying. We emphasize the importance of being financially independent and stable before having children. (It used to be perfectly okay to depend on parents, friends, temp jobs, etc to pull you through when you are young parents.) But I personally feel like this is not true anymore. I have a phone and a laptop–but those are for work and I do not pay for them. I have no gaming machines. I drive a 15 year old car. But I don’t feel like I can… Read more »

lmoot
lmoot
6 years ago
Reply to  Alexis

Even though I don’t think kids should be as expensive as is often stated, and I’d like to think that I could “get by” without financial help if I were to have a child today, I can’t imagine being able to do the same things to boost my financial health that I am doing now, with a child. Working 2 jobs, applying for a 3rd, trying to go back to school, renting out my house to go live with family to save enough to not take out student loans….these are things I do for myself, by choice. With kids, I… Read more »

Jane
Jane
6 years ago
Reply to  Alexis

Alexis – I wanted to add that choosing when to have children, how many to have and all other associated questions are intensely personal matters. If you don’t feel ready, you’re not and no friend or family member (much less a stranger on the internet) should try to convince you otherwise.

I was just discussing how perceptions of readiness might have shifted over the years. And also how the decision to wait can be affected by the realities of biology.

Katie
Katie
6 years ago
Reply to  Alexis

Jane, I think the busy two-income couples who just don’t believe they can support kids until they own an amazing house and are pulling down six figure incomes are pretty much a myth. The people I know who waited to have kids until it was biologically less easy were pretty uniformly people who hadn’t found a stable partner earlier. I’m sure there are exceptions but I’m not convinced it’s this huge trend. No, people don’t have kids as early as they once did, and don’t have as many, but nor are people just putting it off because whatevs. Also, there… Read more »

Elizabeth
Elizabeth
6 years ago
Reply to  Alexis

@Katie #35 — I think you’re right there. Stats say people are getting married later. Heck, some writers even lambast women for not getting married at a younger age and delaying their careers until they’ve had kids. It’s not like there’s a whole swath of people getting married right out of university and waiting a decade to have kids.

Carla
Carla
6 years ago
Reply to  Jane

I had to come to the conclusion that having children (for me) would be extremely selfish on my part no matter how much I wanted to have them. I think its OK that people in this day and age are opting out of children or at least waiting until they are financially and emotionally ready and in a loving, committed and stable relationship. I am glad that I didn’t have children in my 20’s because my life today would be 10x more difficult than I could have ever imagine it to be. Now that I’m in my mid 30s, though… Read more »

Kat
Kat
6 years ago

The list is in sequential order, not order of importance. Having a family is important to me too (I’m 30, or Gen Y), but my life has unfolded more or less in the same order as above: 1. Go to college 2. Get a job 3. Start saving for retirement 4. Buy a car 5. Pay off student loans 6. Buy a house 7. Get married 8. Have kids (est. 2015) Most of my friends are on the same trajectory. That doesn’t mean having kids isn’t important to us. One could argue that steps 1-7 were all in preparation for… Read more »

Marc
Marc
6 years ago
Reply to  Kat

It’s interesting how the cost of education has restructured a LOT of people’s list. My own list at 36 (in sequential order) went like this: 1) Go to college 2) Go to college some more 3) Can’t find a programming job because the .com bubble burst in 2000. 4) Go home and live with my parents while working my grocery store job as a manager. 5) Buy a car 6) Get a job a year and 3 months later. 7) Rent an apartment. 8) Buy a house 9) Get married 10) FINALLY pay off my student loans!!! 11) Start having… Read more »

Thomas | Your Daily Finance
Thomas | Your Daily Finance
6 years ago

I think most people will have their own view and it comes as a part of educating the kids at home. Some say they will pay off college but many don’t even know how much college cost. They think the 5-10k they have saved is a great deal of money until they choose a school that costs 45k per year. When I was growing up you left home after high school. Cant see my kids staying home until 28 thats a little too long if you ask me. I hope they have as realistic goals about the debt college brings… Read more »

nicoleandmaggie
nicoleandmaggie
6 years ago

Are we at Gen Z already? Gosh I feel old.

Mrs. Pop @ Planting Our Pennies
Mrs. Pop @ Planting Our Pennies
6 years ago

If “early twenty-somethings” are Gen-Z, then Gen Y must be the smallest age range for a generation yet. I’m 30, and am right on the cusp between Gen X and Gen Y, getting lumped into whichever seems convenient for researchers.

So that means that Gen X spans about 20 years, and Gen Y just 7-10 (How old is an early twenty-something?) if we’re already onto Gen Z? Not sure I buy it.

LeRainDrop
LeRainDrop
6 years ago

That was my first reaction, too! Then I went to wikipedia and found that the consensus on Gen-Z is actually those people born in the early 2000s to the present, so basically none of the people in the survey are actually in Gen-Z, but are more properly considered squarely in Gen-Y/Millenial generation. http://en.wikipedia.org/wiki/Generation#Western_world

John S @ Frugal Rules
John S @ Frugal Rules
6 years ago

I applaud the sentiment and wishes behind this, though it just shows me even more the need to teach financial literacy in school as well as in the home. Having that base of knowledge will help turn more of these wishes into reality. On a side note, how can we be at Gen Z already?! I feel so old. 😉

lmoot
lmoot
6 years ago

I’m Gen-Y, and even though my family paid for most of university, I didn’t do all that well. I started college courses in highschool, then started my first semester two weeks after h.s. graduation. I was a kid and had no idea what I wanted. I went though all the majors that sounded fun and cool without having any knowledge of the realities. I settled on a degree in English just so I could get the eff out of there. I got a full-time job that pays decent with great benefits (didn’t require a degree), bought a house, will be… Read more »

lmoot
lmoot
6 years ago
Reply to  lmoot

Sorry for all the typos and misspellings. Was rushing and thought I edited them all.

Kingston
Kingston
6 years ago
Reply to  lmoot

I think this is sound advice for many people. College tends to be such an enormous investment these days, it seems like a good idea to wait until you are really, really ready to take advantage of it. Do your partying and maturing somehow, but not via college. That said, I could not convince my 17-year-old to wait. Turns out he-who-hated-high-school does love college, though I think he may be on the same plan as you, lmoot, and will wind up doing it again later. Good thing he’s at a reasonably-priced state university.

Jay
Jay
6 years ago

Saving for retirement is absolutely necessary if you ever hope to not work until you die. However you will need to save as much as you can basically when you reach 20 years old and if your salary is less than around 100k you will need to put a large percentage of your paycheck toward retirement if you even have a shot of a comfortable retirement after inflation and taxes. You will also need to hope that some life tragedy or economic downturn doesn’t occur in your lifetime which causes you to drain what you’ve worked so hard to save… Read more »

Matt @ Your Living Body
Matt @ Your Living Body
6 years ago

Sounds good in theory but with so many people graduating compared to the number of actual jobs available things are probably more bleak than they actually are.

mike
mike
6 years ago

This isn’t Gen Z. This is Gen Y, the Millennial Generation they are talking about here. Gen Z would have started after 2000 and the dates could be up to 2004 when it started. Gen Z’rs are either just being born or are in middle school still.
Gen Z should be called Gentex or Gentech.

Phoebe@www.allyouneedisenough.com
6 years ago

I’m 29 and came out of school with student loan debt, as did many of my friends. I’d say about 75% of my friends have already paid off their loans, even those that owed over $100K because they found jobs that paid well and they lived light while sending most of their money to their loans. The other 25% of my friends however, are really struggling. They came out of school without an idea of what they wanted to do, or majored in something that didn’t make them feel confident to apply for many jobs, and so they are making… Read more »

Rail
Rail
6 years ago

I graduated H.S. in 1988(Gen-X) and being the grand old age of 43 can now actually look back and say “If I could do —— over.” I’m glad I went to Ju-co and didn’t rack up a Gazillion dollars in student debt/loans. Gen X was the on the leading cusp of the student loan debt wave and I know people that are just getting them paid off. My daughter is 7 years old and I wish we could have had her sooner, even tho’ we didn’t have a pot to p–s in it would have been nice to have her… Read more »

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago

“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.” This seems awfully high to me, considering the unemployment rates among young people. I followed the link and it lists average starting salaries in a variety of fields, which together average out to $44K. But is that just the average for those who are actually working in their field of study? I’m guessing it doesn’t include those who are either unemployed, employed part-time, or working full-time in retail… Read more »

cathleen
cathleen
6 years ago
Reply to  Ramblin' Ma'am

Well salaries are so regional as to be useless in some cases.
I’m the last year of the baby boom (1964) and my starting job out of college was $39K. That was 27 years ago in Silicon Valley.

So I usually disregard the salary numbers in these stories as inapplicable to me. But the concepts are the helpful.

Ramblin' Ma'am
Ramblin' Ma'am
6 years ago
Reply to  cathleen

Well, I live in MA, which is one of the most expensive states, yet our average household income is $62K.And that includes many households with two wage earners. So the idea that, on a nationwide level, college grads make an average of $44K as a *starting salary* seems off.

Rubymermaid
Rubymermaid
6 years ago
Reply to  Ramblin' Ma'am

I make about 41,000 a year (I’m hourly) and I’ve been working for over 2 years as a staff accountant at the same company. I can’t save anything right now on this salary… I wish I made 50,000 or more. I live in Southern California.

Barbara Friedberg
Barbara Friedberg
6 years ago

I would recommend those facing college seriously consider doing the first few years at a community college, live with parents, work part time and save money. It is possible to go to state schools, work part time and get out of college without debt. Starting life without debt will give you a tremendous financial advantage.

Alexis
Alexis
6 years ago

I’m confused about the difference between Gen Y/Millenials and Gen Z. The Wikipedia article for “Gen Z” says it’s those born in “the mid or late 1990s or from the mid 2000s to the present day”. None of those would be 25 today (i.e. Tiffany’s age in the article, and my age as well). The oldest of them would be entering or in college.

At 25, I definitely consider myself Gen Y, and we’re the cohort with student debt, with realistic career expectations, and also boomeranging home.

Marsha
Marsha
6 years ago
Reply to  Alexis

There’s not an official generation-naming authority, so anyone writing an article or book can use any classification they want. Usually over time, the preponderance of one name beats out the others. I think “Generation Z” is a bad name because it’s meaningless, and what do we name the generation after that? Start the alphabet over?

I personally dislike the categorization of people simply by their birthdates. There’s all different sorts of people in all the generations, and I don’t feel a particular kinship with someone just because we’ve been artificially classified into the same generation.

Jake @ Common Cents Wealth
Jake @ Common Cents Wealth
6 years ago

It’s great to see that the new generation is actually thinking about all of this. I know my generation (Gen Y)got into a lot of trouble with student loans because they didn’t think about them beforehand.

Jen Y
Jen Y
6 years ago

I’m surprised at the statistic that only 49% would still be embarrassed to live with their parents at age 25 – though I do know quite a few kids who do still live at home. I moved out at 18 & lived on very little but it was worth it to have my independance. My son started saving in his 401K by age 19 & is on his own at age 20 with no debt at all. Though he has had some help – his grandmothers bought his car (a 1998 Honda Accord) & we paid his housing & insurance… Read more »

Beth
Beth
6 years ago
Reply to  Jen Y

I think more people aren’t embarrassed because these days it’s not a big deal to move back home. I know many people my age (I graduated college about 10 years ago) who moved back home for a year or two after college, then moved out for good. With student loans being so high, it’s a practical thing to do. I was also talking with a family friend about the recent trend in college grads moving back home. He pointed out that in many cultures, a multi-generational family living under one roof isn’t unusual. It would actually be kind of neat,… Read more »

Squirrelers
Squirrelers
6 years ago

Agreed that saving for retirement needs to be higher on the list. The fascination with buying a nice house is one that seems to be pervasive across generations.

All that being said, it sounds like younger people are a little more sensible than prior generations were at the same age. Which they should be, since it fits the reality of present day life.

Dr. Dina
Dr. Dina
6 years ago

I love hearing that gen Z has a plan for the future, but a plan rarely comes together the way we expect. Having kids were last on that list, and while the goal is to be prepared for kids financially, i have found that in many cases, kids show up on the reality list much much sooner. To save money is a difficult thing for many, something always comes up that needs to be paid unexpected.

RockySense
RockySense
6 years ago

I suppose that at 23 I am “Gen Z.” If this article is any indication, it seems that I’m ahead of the curve somewhat, which is encouraging. I’m fortunate enough to still have my car that I bought in high school (granted, by the age of 17 it was my third car – but I paid for all of them myself!) I was also able to produce a decent emergency savings fund by the time I was 18 or so, and it’s grown even more since then (a small automatic deduction from my paycheck and putting a good portion of… Read more »

Ashely
Ashely
6 years ago

No emancipation for the Smith kids!! That’s funny. I didn’t move out of my parents house until I was 25. I just didn’t want to move out and then have to come back because I couldn’t do it. I wanted to make sure I could do everything on my own before I left and my parents were alright with that.

bemoneyaware
bemoneyaware
6 years ago

Though you can’t trust the survey fully but there is some pattern that one can see emerge.
The last few years have been wake up call for everyone and this had made Gen Z very realistic..It is a tough, volatile world out there..

Derek - MoneyAhoy.com
Derek - MoneyAhoy.com
6 years ago

Yes, emergency fund needs to be at the top of the list after find job.

That is like your shield!

Camp System
Camp System
6 years ago

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