Gen Z is making waves in the investment world by starting early in their financial journey. According to the 2024 Schwab Modern Wealth survey, Gen Z adults have already begun investing and saving at the young age of 19 on average. This is a stark comparison to previous generations, as baby boomers began investing at age 35 on average, and millennials at 25. Starting early has proven to be beneficial, as it allows for the power of time and compounding to work in their favor.
One of the key advantages of starting early with investing is the power of compounding. Rob Williams, a certified financial planner from Charles Schwab, emphasizes that saving a dollar today and allowing it to grow over time can lead to significant wealth accumulation. For example, a teenager who opens a retirement savings account at 19 could end up with hundreds of thousands more compared to someone who starts in their 20s. This highlights the importance of making small contributions consistently over time.
Experts recommend that young individuals consider opening an individual retirement account (IRA) as a way to build wealth early on. One popular option is a Roth IRA, which allows after-tax contributions and offers tax-free growth. Ed Slott, an IRA expert, suggests that young people should prioritize Roth IRA contributions as soon as they start working. By establishing this habit early, individuals are more likely to continue saving and investing for the long term.
Gen Z’s confidence in investing is largely due to the increased accessibility of financial resources. The Schwab report shows that over a quarter of Gen Z has learned about investing in school, compared to previous generations. Additionally, the abundance of information available online and on social media has contributed to their financial knowledge at a young age. However, experts caution against solely relying on social media for financial advice and recommend consulting with a trusted financial advisor for guidance.
While student loan debt is a growing concern for many young individuals, experts advise against letting it hinder their investment journey. Despite the significant amount of student loan debt held by young borrowers, it is important to find a balance between debt repayment and investing for the future. Williams suggests making minimum loan payments while starting small with retirement savings, even if it means setting aside a modest amount each month.
The Schwab survey reveals that most individuals prefer consulting with a financial advisor over social media influencers for financial advice. About 57% of respondents are more likely to engage with a financial advisor, emphasizing the value of professional guidance in making informed investment decisions. While social media can provide information, it is essential to seek advice from reputable sources for long-term financial success.
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