What’s Your Relationship With Money?

(L-R) Chiranjeeb Sarkar, 26, a techie working with a US MNC, wants to save enough for travelling and retirement; Nainital-based Kavita Aswal, 25, a video editor, has a clear cut vision of what she wants to achieve; Devasish Sharma, 25, a Bengaluru-based data analyst, invests in stocks and mutual funds

The Gen Z have grown up in the lap of the modern digital technology, unlike the millennials who have experienced glimpses of the old world before the arrival of the digital boom.

Naturally, the Gen Z comprehend the world around them differently from people of earlier generations. This is true even in their dealings with money.

While their comfort with technology has enabled them to be more adaptable, innovative, tech-savvy and aware, it also exposes them to greater levels of frauds.

They are also more likely to take unwarranted risks due to lower levels of awareness about the right financial products. Also, easier borrowing options can sometimes make them prone to bad financial decisions.

Clarity About Future

Securing The Future: Most Gen Z are conscious of investing because of the easy availability and accessibility of different investment options and forums that talk of goal-based planning, and the presence of government entities working towards spreading awareness.

Says Arijit Sen, a Securities and Exchange Board of India (Sebi)-registered investment advisor and co-founder of Merry Mind, a Kolkata-based financial advisory firm: “As a financial advisor, I have been working with quite a few Gen Z clients and I have observed a few common approaches among them. They are very particular about their life goals—be it accumulating funds for their wedding, buying a car, owning a property, or planning for retirement.”

Sen himself is a 29-year-old and closer to the Gen Z clientele in terms of understanding their needs and what they expect from their lives.

That reverberates with how Kavita Aswal, 25, a Nainital-based video editor, has planned out her life. “I want to complete my study, marry before my 30s, buy a car in five years and a house within 10 years. Before my 40s, I want to stick with one job which I like the most,” she says.

Chiranjeeb Sarkar, 26, a software developer at a US-based MNC in Kolkata, has a shorter list as of now, limited to “saving enough money for early retirement and traveling.”

Unlike the earlier generation, which invested heavily in fixed-income instruments and insurance policies, Gen Z is not afraid to take risks. That reflects in their investment choices, too.

Devashish Sharma, 25, a Bengaluru-based data analyst invests mostly in equity and mutual funds. “Since I don’t have financial responsibilities, and my risk appetite is on the higher side. I don’t invest in fixed deposits and government bonds. I invest in large-, mid-, and small-cap equity,” he says.

Kavita invests in stocks and mutual fund systematic investment plans (SIPs) about which she gathered information on educational-cum-investment apps.

Says Maitry Shah, founder, LakshMe, an educational platform that works towards increasing financial literacy among women: “Technology has played a huge role through faster and more reliable access to information. Hence, it has helped them to take positive initiatives related to money.”

Investing In Themselves: The Gen Z lead a fast-paced life defined by deadlines and high pressure. Hence, they know the importance of investing in themselves to stay ahead of the race. They know that they constantly need to enhance their skills and knowledge to stay relevant in their workplace and move ahead in their careers.

A lot of them are clear about what they want in life, and that leads them to investing in themselves, says Sen.

“One approach to the philosophy of money is to view it as a resource that can be used to achieve personal and professional growth. This can involve investing in education, training, and experiences that can enhance one’s skills and knowledge. By investing in oneself, one can increase the earning potential and achieve greater financial security and stability,” says Kavita.

She spends money on online courses to enhance her qualifications, and invest in soft skills and hobby such as dancing for her self developmenty.

Unhealthy Financial Habits

Though it has been observed that the Gen Z have a lot of clarity about how their future should look, sometimes unhealthy financial habits can come in the way. The two main reasons behind these are the easy availability of credit and the attitude to take more or unwanted risk than actually warranted.

Easy Credit: The mushrooming of loan apps and credit cards can put Gen Z at risk, who may not realise how soon debt can pile up and to what extent.

“The problem is not with taking loans, but planning to repay the debt. One is required to have a strong financial footing and be prepared to pay off the loans on time,” says Shah.

She adds that credit card debts are the worst that usually get accumulated due to the habit of splurging, and it is important for the Gen Z to be careful about how they use these. “If used properly, credit cards can be rewarding too,” says Shah, referring to the rewards systems, the debt-free window that can help manage expenses, and the fact that it can help build a positive credit history. Kavita has two credit cards, but she treats them as tools to manage her expenses and build a healthy credit score.

“I want to buy a car and house, and so I have to balance my credit score. I am using the credit card since 2018, and I pay off my credit card balances in full each month.”

Devashish also repays the full amount every month, though he uses credit cards regularly. Paying only the minimum due amount every month can inflate your credit card bill by multiple times.

Unwarranted Risk: Experts say that at a young age, one can afford to invest in more risky instruments when the investment horizon is long.

However, this does not mean that Gen Z should expose themselves to unwarranted risks, they add.

In their quest for excitement and thrill, sometimes they may make imprudent decisions. For example, a lot among the generation reportedly burnt their fingers in cryptos.

“Experimenting with your hard-earned money is never a good idea. Many Gen Z people ask me about my views on crypto and whether they should invest in it or not. I have heard many saying that one can put that much money that one can afford to lose. To me, this is unjustified,” says Sen. “I keep telling them that you’ll find many who’ve succeeded by following the simple and even mundane paths. Having a financial plan and following the same with discipline is the key,” he adds.

Investing in equity instruments entails higher risk, but if it is done with a long-term horizon in view, it can be rewarding. So it’s important to be careful about the risk one takes.

The relationship with money, as with several other things, may be tentative at a younger age. Thus, it makes sense for Gen Z to tread with care.

meghna@outlookindia.com