Smart and savvy: Why we should be asking Gen Z for money advice

“Cut down on the avocado toast, and you might be able to afford a house” is the common refrain weathered by Millennials and Gen Z Australians. These parodies of younger generations tend to poke fun at their supposed laziness, social media obsession and frivolous spending.

Like many stereotypes, it may be grounded in some truth. However, in my experience teaching hundreds of young people about personal finance, I would argue that this characterisation is on the whole unfair.

Driven primarily by the rapid rise in house prices, there is growing evidence that Gen Z may have it worse than their parents’ generation. It now takes more than 12 years to save a 20 per cent deposit for an average house, compared with six years in the early 1990s.

As a result, Gen Z are more concerned about finances than any generation in Australia, and were seen to cut back spending most in the recent cost-of-living crisis (AKA “cozzie livs”).

I don’t mean to reignite the oft-sensationalised generation wars. While many older Australians can claim commensurate wisdom, they shouldn’t pretend they are perfect when it comes to their finances. Hence, there is an opportunity to learn from younger Australians on how to manage their money.

To begin, Gen Z are more willing to move between jobs early in their career, often to achieve pay bumps and improved working conditions. Young workers who job-switch earn an average of $7500 more per year than those who stay.

Gen Z prioritises living today rather than accumulating wealth at all costs.

“Why would I stay somewhere with less pay and worse hours?” one of my students points out. Of course, broader career considerations matter, but I applaud the younger generation for refusing blind loyalty to multi-billion-dollar enterprises. Long gone are the days when workers would stay loyal to one employer for decades.

Young people are also adept at seeing through employers who tout a “family-like culture” that, in practice, means long hours and little appreciation from leadership.

And it’s not just employers that Gen Z are less loyal to. Young Australians are more likely than older generations to switch banks and financial providers. Almost one third of Gen Z Australians show intent to switch banks when their current bank’s interest rates are not competitive.

This type of savvy consumer behaviour is great not just for those who optimise their own finances, but it also forces banks to be more competitive in their offerings. Successive treasurers from both sides of politics have regularly urged consumers not to be overly loyal to their banks, insurers or telcos.

When Gen Z aren’t switching jobs or banks, they’re focusing on side hustles. Reportedly, one quarter of Gen Z Australians have one, although this isn’t all great news. A key reason for the rise in side hustles is likely due to cost-of-living pressures and lower wage growth forcing younger people to find ways to supplement their primary income.

On the flip side, side hustles build skills and foster entrepreneurship. What begins as supplementary income can evolve into something more substantial.

The Australian Bureau of Statistics’ addition of “content creator” (or “influencer”) to its official jobs list in 2024 signals that these new forms of work are no longer fringe pursuits, but recognised parts of the labour market.

In an economy struggling with productivity growth, encouraging young people to experiment with new business models will probably prove beneficial.

Lastly, Gen Z prioritises living today rather than accumulating wealth at all costs. Economists call this “consumption smoothing”. I’d suggest that treating money as a tool to enable flexibility and life satisfaction (at all ages), rather than as an end in itself, is a healthy mindset switch.

Money has no intrinsic value. It is simply a medium of exchange that derives meaning from its ability to buy things we want, whether it’s travelling, supporting your family, or giving generously to others.

Focussing on using your money for things that are important to you while you’re alive is a superior approach to dying a multi-millionaire, in my opinion. If you’re 80 and wealthy enough to be debating a third Porsche, you might wonder whether you should have taken that year off in your 20s to travel the world after all.

It can be easy for older generations to look at Gen Z and decry a loss in long-term careerism, institutional loyalty, and hawkish savings discipline. However, I’d say that Gen Z intentionally trades these off for things that it deems more important.

What Gen Z may arguably lack in wisdom, they make up for in savviness; something unquestionably necessary in these trying economic times.

Max Yong is a teaching fellow in personal finance at Harvard University. He previously taught personal finance at Melbourne University.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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