3 in 4 of Gen Z prioritize quality of life over money, according to a report by Intuit. This trend, known as “soft saving,” challenges traditional notions of saving for the future. Soft saving refers to putting less money into savings and using more for immediate enjoyment. Gen Z, which values experiences over money, leads the soft saving wave. This generation embraces a “soft life” that emphasizes comfort, low stress, personal growth, and mental wellness.
The Prosperity Index Study by Intuit found that Gen Z’s approach to investing and personal finance is softer than previous generations. Younger investors are more likely to put their money into causes that align with their personal views and seek emotional connections with the brands and professionals they engage with.
The report also suggests that Americans, in general, are saving less. The U.S. Bureau of Economic Analysis reports that the personal saving rate in August was only 3.9%, significantly lower than the 8.51% average of the past decade. This decrease in savings can be attributed to the rebound from the Covid-19 pandemic, with people spending more to make up for lost time. Inflation also makes it harder for people to cover their expenses or save.
The changing financial goals of younger workers play a role in the declining personal saving rate. As younger individuals enter the workforce, they prioritize finding a balance between saving for the future and enjoying life in the present. Retiring with a comfortable lifestyle is a concern for many workers, with only 53% believing they are on track to achieve this goal, according to a report by BlackRock. However, the definition of retirement is evolving, with many younger generations expressing a desire to continue some form of paid work during retirement.
Despite their intention to work longer or not retire at all, younger workers are still actively saving for retirement. Fidelity’s second-quarter retirement analysis revealed that millennials and Gen Z are major beneficiaries of the 401(k) saving plan, with significant increases in average balances. This shows that although younger workers may not have traditional retirement plans, they are still focused on securing their financial future.
As younger individuals save less, they are directing their money toward hobbies and non-essential purchases. The study by Intuit found that millennials and Gen Z are more willing to spend on their passions and hobbies compared to older generations. Travel and entertainment are among the non-essential experiences that the younger generation prioritizes. However, these spending habits do not necessarily mean that they are living paycheck to paycheck. Gen Z appears to be living within their means, with their increased spending reflecting rising costs of essentials rather than a taste for luxury.
In conclusion, Gen Z’s prioritization of quality of life over money is challenging traditional saving norms. This younger generation embraces a softer approach to finance, focusing on experiences and personal growth. While they may save less, they are still actively saving for retirement and directing their money toward their passions and hobbies.
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