Summary of this article
Millennials focus more on saving, while Gen Z takes higher risks.
Gen Z invests in stocks and mutual funds; Millennials prefer safer options.
Gen Z often learns from social media, unlike Millennials who trust experts.
By Ishkaran Chhabra,
Millennials on Gen Z: “They don’t understand the value of traditional savings."
Gen Z on Millennials: "They overthink every financial move, paralysed by analysis."
Every generation gets its label, and, with Gen Z, the ‘instant gratification’ stereotype tends to stick, whereas Millennials are more likely to be seen as overanalysers. However, real financial literacy is more about adaptability to a changing economic landscape than saving prowess. Our approach towards handling money is constantly evolving due to the economy, technology and easier access to financial information.
In the current fast-paced economy, financial literacy has become a necessity. Millennials and Gen Z are transforming deeply ingrained socio-economic norms and are, in turn, creating new expectations that are compelling financial institutions to rethink their engagement strategies with the next generation of customers.
How the Economy Shapes Financial Mindsets?
The economy influences how people think about money and how they spend it by affecting job opportunities, wages, and living costs. For example, earning potential significantly impacts the ability to save and spend. When the economy is growing, job demand and wages usually rise. This encourages an optimistic approach to finances, often referred to as an abundance mindset. In contrast, during a downturn, people tend to become more cautious and adopt a scarcity mindset.
Millennials and Gen Z’s financial attitudes are influenced by the economic climates they grew up in. Millennials, entering the workforce in the post-liberalisation boom in India, were influenced by the global recession in 2008, which led to their savings-based and cautious mentality. Meanwhile, compared to Gen Z’s, who experienced the uncertainty of jobs during the pandemic, the entrepreneurial mindset and a side-hustle mentality have been stoked by the digital-first generation. Though Millennials are more inclined to rest on conservative fiscal methods, Gen Z would favor more developmental and technologically empowered strategies to handle their finances.
Let’s explore how these two generations differ in their financial interests and priorities:
1. Investment Preferences: Millennials prefer to invest in more conservative investments like term and health insurance and thus postpone the receipt of liquidity as a way of protection. Instead, Gen Zs are more inclined toward SIPs and stocks, as they show a readiness to take greater risks in exchange for possible gains. According to a survey conducted by Policybazaar, Gen Zs are more willing to make investments in equity markets compared to the older kinds of investors. The fact that Gen Zs have an even greater interest in mutual funds marks a generational change in terms of the want or need to have their money digitally and passively managed.
2. Risk Tolerance: Gen Zs can be more willing to take risks and are curious about new and high-growth opportunities. Conversely, Millennials are more conservative and opt-in to more well-established methods of investment. The YouGov report of 2023 shows that Gen Z is ahead of Millennials in the adoption of riskier, growth-oriented investment assets, with 32 per cent owning stock as opposed to 24 per cent of Millennials. To highlight, 26% of Gen Z possesses exposure to cryptocurrencies, almost twice as many Millennials at 14 per cent, indicating their readiness towards novel and alternative ways of investing. Real estate crowdfunding, peer-to-peer lending, and digital gold are other emerging areas of interest for Gen Z.
3. Savings Habit: Gen Zs are less willing to spend and more inclined to save after witnessing the hurdles encountered by the Millennials as a result of the recession. As per the ET Snapchat Gen Z Index, over 73 per cent of Indian Gen Z save at least 30 per cent of their monthly income. The preference towards saving and spending can also be seen through their increased use of UPI and mobile wallets to make payments in India. This balancing of budgetary conscientiousness of both spending and savings with technological adaptation demonstrates a generation concerned with monetary well-being in the vectors of contemporary financial technology.
4. Financial Knowledge: Influenced by the financial upheavals that rocked the world economic scene in 2008, Millennials rely heavily on expert financial planning and will want a detailed explanation of complex planning and risk mitigation strategies. Gen Zs are instead using social media and peer networks to peg their financial advice on heavily. In many instances, they are often following unverified or case-based suggestions. This has, in a number of cases, led to monetary losses, more so in risk-prone areas like F&O trading.
5. Alternate Income Streams: With increasing inflation and changing career ambitions, Gen Zs are showing an exceptional shift towards the gig economy due to flexibility, supplementary income, and better work-life balance. A survey conducted by Deloitte revealed that 66 per cent of Gen Z in India actively work on their secondary income, both full-time and part-time, as opposed to 53 per cent of the Millennials. This pattern supports the flexibility of Gen Z and shows a wider generational shift towards diversified income streams as a strategy for financial security.
Although the approaches are different, both Millennials and Gen Z prioritise financial independence and understand the value of financial literacy. While both generations aim to achieve empowered and informed financial decision-making, Gen Z opts for more flexibility and prefers digital tools, while Millennials lean toward steadier, more structured planning. This convergence underscores flexibility and caution in India's evolving economy.
The author is Founding Partner and Chief Investment Counsellor at Centricity WealthTech.
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
