The Price Of Growing Up Gen Z

The Covid-19 pandemic was an epoch changing moment, especially for the Gen Z who were in their early 20s and entering the work force at the time. US think tank Pew’s Research Centre defines Gen Z as those born between 1997 and 2012. When you start your career in the midst of a pandemic, with death becoming a daily statistic, you tend to live for the moment rather than plan for the future. For many Gen Z, that’s exactly what happened.

Says Abhishek Kumar, a Securities and Exchange Board of India-registered investment advisor (Sebi RIA) and founder of SahajMoney, a financial planning firm, “Economic instability due to various factors has made Gen Z take a pragmatic relationship with money where they prioritise survival over the optimistic wealth accumulation seen in previous eras.” He feels this generation is embracing soft saving, focusing on immediate quality of life because traditional long-term milestones feel increasingly unattainable.

However, taking such a myopic approach towards life and finances can have a serious repercussion on your future well-being, both psychologically and financially.

Challenges Gen Z Face

Uncertain Job Market: Many Gen Zs were born when the job market saw its first IT and tech related job crash, the dot com bubble of the early 2000s. During their growing up years, even before they hit their teenage years, they saw the 2008 global meltdown. Certainly, they were too young to fully comprehend it, but some of them might have seen their parents, uncles and aunts, or even older cousins experience job loss.

When they entered the job market around a decade later, Covid struck. The pandemic halted all economic activity overnight, jobs thinned out, education systems had to adapt to new reforms, and the nature of corporate work changed. Internships and new hiring disappeared, and career paths that were once predictable transitioned into a pit of questions and doubts.

As the world picked up, artificial intelligence (AI) and machine learning (ML) spread its fangs, further eating up traditional jobs. The job market is now largely defined by short-term contracts, shifting industries, and rapid technological change. One of the most visible shifts has been the rise of gig and freelance work. That brings flexibility, but it comes with a downside: lack of stability.

Dhruv Jaipuria, 21, an engineering intern at the Defence Research Development Organisation (DRDO), New Delhi, relates to the uncertainty prevailing in the job market. “It influences career choices and our perspective on how job-ready we are and if the education and the amount of effort that has been put in over the years would get rewarded or not.”

Dhruv, now in his last semester of B. Tech (electronics and communications engineering) from Vellore Institute of Technology (VIT), says he is looking for a job but is open to pursuing an MBA if things do not go as planned.

Says Kumar: “The most significant disconnect is the widening gap between productivity and real compensation, compounded by the steep rise in housing and education costs. This forces entry-level employees to spend a majority of their income on basic survival, preventing them from participating in the wealth building cycles that benefited earlier generations.”

Digital Stress: One of the major factors that has led to an increase in digital stress among Gen Z is exposure to others’ affluent lifestyle through social media. This has also led to the rise in FOMO (fear of missing out).

Says Col. Sanjeev Govila (retd), CFP, and CEO, Hum Fauji Initiatives, a financial planning firm: “Gen Z is dealing with constant visibility of other people’s financial lives. Social media has created a distorted benchmark of success: early wealth, early (posh) lifestyle, early everything. That’s adding a layer of stress which previous generations didn’t face in the same way.”

Bhavya Saxena, 26, a senior software engineer at TruVis.ai, an AI-based start-up in Mumbai, realises the dangers but has often seen his friends begin to doubt themselves by comparing their lives to those of seemingly well-settled influencers.

Says Dr. Mimansa Singh Tanwar, clinical psychologist, Adayu Mindfulness, Fortis Healthcare, Gurugram: “There is an influence of social media, which often creates this need to maintain a certain kind of a lifestyle, whether it is travel, brands that one is looking, what their peers are doing, so on and so forth.”

The Loan Burden: Add the loan factor, and the problem exacerbates. Says Malobika Chaudhary, 25, who is pursuing masters in marketing management at the University of Leeds in the UK: “(The loan) is always on my mind. There are some of my friends who don’t have the same pressure of debt as me. I often worry about my future job, as I not only have to worry about getting one that would help me pay for my living, but also enough to set aside some amount monthly for repayment of the student debt I have. Adding to this pressure is saving for the future. With the current situation in the job market, the chances of international students getting a job anywhere is a huge struggle.”

The Fallout

Overspending And Debt: One of the major fallouts of FOMO is overspending and debt. Many Gen Z resort to loans either in the form of personal loans through credit cards or easily available buy-now-pay-later (BNPL) schemes to fund their travel and other lifestyle expenses, which often leads to financial mismanagement in the form of spiralling debt.

Riya Tyagi, 23, who works as a consultant in an engineering firm, says she bought a projector on a BNPL scheme. So far, she has not missed any instalment, but the fact that she has to service a debt keeps her under pressure. BNPL schemes come with a relatively high rate of interest and penalties in some cases.

The rate of interest on credit cards can be as high as 36-48 per cent per annum. So, if you spend on an expensive product through a credit card, and are unable to service the debt on time, you can easily fall into a debt trap.

No Plan For Wealth Building: In all this, saving and investing takes a backseat.

It’s also about the mindset. Govila says he has come across many Gen Z employees who prefer a higher take-home pay rather than invest a portion of their salary in something like the National Pension System (NPS). Obviously, this can have a serious implication on long-term savings and rob one of the power of compounding.

He points out at systemic problems that add to this. “One is overload of information that leads to confusion. Two, financial products are still not designed for first-time earners; they are designed for distribution. Three, workplaces don’t do enough to integrate financial well-being into the system. A young employee shouldn’t have to figure out everything alone. Even small things, like structured guidance on savings, insurance, taxes, can reduce a lot of anxiety early on.”

Strategise Right

Update Your Skills: Instead of getting bogged down by fast-paced technological changes, the Gen Z needs to continuously upskill by mastering emerging technologies and industry-specific tools to remain competitive in the job market.

Kumar says the Gen Z should move away from a mindset of scarcity-induced panic to one of intentional, long-term utility. He says: “They must recognise that their career is a marathon of skill acquisition rather than a race towards a fixed destination, which will help them effectively address issues outside their control. Understanding that small, consistent actions are more powerful than perfect early decisions can allow for a more sustainable and less stressful financial life.”

Govila says upgrading oneself to changing circumstances is now a prerequisite, not an option. He says: “Nobody today asks whether you know how to operate a computer. It’s a given. The same is with AI, albeit in a nascent stage. It will become a part and parcel of your work life in a few years. So, whatever field you are in, you need to understand how AI works because it will affect your career and your survival in the job environment.”

Go For A Digital Detox: The best way to stay away from FOMO is to cut off from social media influencers and go for a complete digital detox every now and then. Inculcating a healthier lifestyle habit or following a hobby could help.

Otherwise, use it productively. Govila says harnessing trusted information sources on social media and the Internet for financial education can help. “Even a one-hour daily routine for a month can give enough knowhow on basic concepts such as savings, expenditure and avoid blunders, like high interest debt or unplanned expenses,” he says.

Also, look at your ground reality before comparing. For Bhavya, social media sometimes instilled a feeling of being ahead financially and sometimes behind, but he has remained grounded. “The far-fetched lifestyles many influencers showcase feel far from what an average person my age can realistically achieve, especially while working as a software engineer,” says Bhavya.

Avoid Or Manage Debt: Ideally, one should avoid spending on luxuries through debt. For credit card debt, ensure you repay in full before the next payment cycle. If you have multiple debts, pay off the high interest ones first.

Avoid Instant Gratification: Investing for something you want to buy is a better strategy than buying it on equated monthly instalments (EMIs). Make separate buckets for short- and long-term goals.

Govila advises against forsaking any ongoing long-term investment for fulfilling something for immediate gratification. For instance, stopping systematic investment plans (SIPs) or using up the emergency fund to fund lifestyle expenses are bad ideas.

Build Stability And Protection: The first step should be creating an emergency fund to create a safety net. Kumar advises the emergency fund should ideally cover 6-12 months of basic living expenses. In case of loss of income, he advises cutting off all discretionary expenses.

For further stability, having adequate insurance is a must. Govila advises getting a health cover in addition to the one provided by the employer to cover periods of unemployment. Also, get a health coverage for dependents and a term life cover for yourself.

In a world where disruption has become normal, the most valuable financial tools remain the right knowledge, informed decision-making, resilience, and patience.

sanchi.varma@outlookindia.com

s.sanyal@outlookindia.com