Gen Z Wins a Participation Trophy for Investing

Gen Z is crushing investing – at least when it comes to participation. This cohort, currently between the ages of 12 and 27, began investing at age 19 on average, according to a Charles Schwab survey. That’s much earlier than older generations, including millennials, who started in their mid-twenties on average, or boomers, who were more likely to have begun in their mid-thirties. A quarter of GenZers, or “Zoomers,” started investing before they turned 18, according to the CFA Institute. And nearly half have some money invested, according to Barron’s.

Why does this matter? When it comes to investing, the earlier you get involved, the better – no matter which generation you belong to. A longer investing horizon gives your money more time to snowball through the power of compounding, which is when your returns add to your principal, providing a larger sum on which to earn interest. 

Risky Business

Gen Z is investing in greater numbers both because it has become easier – thank you smartphones, ubiquitous connectivity, and intuitive apps – but also because of its values including comfort with risk and a fear of missing out. In fact, 46% of Gen Z investors are “willing to take substantial or above-average financial risks,” according to a Finra Foundation study, and 50% say they have made an investment driven by FOMO.

These investments are not always of the most conservative stripe. Of Gen Z investors, 73% own stocks, making it the most popular type of investment, according to NASDAQ. But nearly half of Gen Z investors own dabbles in cryptocurrency and NFTs. In keeping with this, Gen Z is significantly less likely to invest in mutual funds and ETFs than Millennials.

Though Gen Z’s native comfort with technology is a driver – the oldest Gen Zers were 10 when the first iPhone was introduced – the role of social media can’t be understated. TikTok is overrun with finance content creators (aka “finfluencers”). And their impact is real: More than three-quarters of Gen Zers use TikTok and YouTube for financial guidance, according to WallStreetZen – even though that content may not have been vetted for quality or accuracy. 

Do Your Own Research

Though social media, and TikTok in particular, have effectively introduced Gen Z to the practice of investing, it’s less clear that they’ve directed this cohort into actual credible investments. A lot of social media finance content creation can be confusing or outright deceptive, given the inherent lack of quality control. In fact, a whopping 83% of Gen Zers surveyed by WallStreetZen reported having encountered misleading personal finance information. And only 20% of the content that recommended an investment included a disclosure to indicate whether the person recommending had been paid or had ties to a financial product, according to the CFA Institute. 

Investing is a journey, and mistakes are a part of learning. The fact that Gen Z is already in the market in large numbers represents a huge advantage for this cohort — even if there are some missteps along the way. As always, the cornerstones of financial literacy are to do your homework, consult credentialed experts and credible sources, and remember: The most meaningful driver of long-term wealth through investing is time in the market. And Gen Z has that in spades.

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