Generation Z (Gen Z) has been shaking up the financial industry with its unique banking habits and reliance on social media for financial advice. As the first generation to grow up with technology at their fingertips, Gen Z has been utilizing platforms like TikTok, Instagram, and Twitter for financial insights. This shift in how they seek and consume financial information presents both opportunities and challenges for financial brands and their marketing strategies.

This article aims to provide a comprehensive understanding of Gen Z's banking habits, the influence of social media, and the importance of adopting a holistic approach to financial well-being to serve this digitally native generation effectively.

The Role of Social Media in Gen Z's Financial Lives

Gen Z is almost five times more likely to obtain financial advice from social media platforms compared to people aged 41 or over. TikTok, in particular, has become a popular source of financial advice for this generation, with 34% of Gen Zers seeking advice from the platform. Instagram and Twitter are also popular among Gen Z, with Elon Musk's intentions to transform Twitter into a financial services hub potentially contributing to its growth in the future.

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However, there are concerns about the quality of financial advice available on social media platforms. Critics argue that Finance TikTok perpetuates financial myths, scams, and dangerously misleading information, as users often see advice from random individuals rather than trusted sources. Despite these concerns, it is essential for financial brands to understand what motivates Gen Z to consume financial content on social media platforms and adapt their strategies accordingly.

The Rise of Finfluencers and the Need for Regulations

Influencers have become increasingly popular, offering educational information on topics such as investments, personal finance, credit card debt, 401(k)s, real estate, and negotiations. Some finfluencers claim that AI software like ChatGPT can help their viewers become millionaires by performing free labor, such as writing books and creating YouTube videos. While some finfluencers provide valuable insights, many others dangerously spread misleading financial information that could harm vulnerable investors.

Finfluencers who work for regulated financial companies or are hired by them for social media content can face punishment for errant conduct by organizations like the SEC, FINRA, or FTC. However, those who do not fall into these categories can create misleading content without consequences. It is crucial for the financial industry to advocate for stronger regulations and oversight to protect consumers from potentially harmful financial advice.

Traditional Financial Institutions vs. Finfluencers

As Gen Z relies more on social media for financial advice, traditional financial institutions have been slow to adapt to this new landscape. Companies like Wells Fargo and T. Rowe Price have found that social media is a significant source of financial information for young people, with a preference for cryptocurrency, meme stocks, and NFTs among this demographic.

Independent FinTok influencers like Mark Tilbury, Humphrey Yang, Tori Dunlap, and Erika Kullberg have amassed millions of followers, while traditional financial giants like Fidelity and BlackRock struggle to gain traction on platforms like TikTok. To remain relevant and competitive, financial brands must adapt their strategies to effectively engage with and serve Gen Z consumers on social media platforms.

Addressing the Mental Health Crisis and Social Issues

Gen Z and Millennials place a high value on their financial providers' stance on social and political issues. Banks' positions on these matters impact consumers' choice of providers, with over 40% of Gen Zers and 30% of Millennials selecting a financial provider based on the bank's position on social issues. 

Mental health is a significant concern for Americans, and financial therapy, which sits at the intersection of financial and mental health, can help improve overall well-being. Offering financial therapy solutions can create a differentiated solution in the market and address the growing mental health trend among younger generations.

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More than half of Gen Zers and nearly half of Millennials would like to see messages about the social actions their bank is involved with when they log out of digital banking platforms. Financial brands must recognize and address these preferences to attract and retain younger customers.

Rethinking Financial Literacy Programs

Traditional financial literacy programs have proven to be largely ineffective, as one-size-fits-all financial education has little to no effect on changing real-world financial behaviors. Furthermore, financial illiteracy might actually lead to better financial outcomes, as those with limited financial knowledge often adopt more risk-averse strategies.

Financial education should be contextual, behavioral, and measurable, focusing on financial outcomes rather than simply increasing literacy. Additionally, providing financial education without taking into account mental and physical health should be considered financial malpractice, as financial well-being is closely linked to overall well-being.

Understanding Gen Z's Financial Expectations

Gen Z has high financial expectations, with a 2022 survey revealing that they require an average salary of $171,633 to feel financially healthy – the highest income compared to older generations. However, they have the lowest expectations when it comes to how much they need in savings.

Moreover, Gen Z is buying homes at a faster rate than previous generations, with 30% owning homes at age 25 in 2022. Factors such as entering the labor market during better economic conditions and the influence of social media have contributed to this trend.

Gen Z and Millennials' Work Ethic: A Shift in Priorities

A study by Deloitte found that Gen Z and Millennials prioritize work-life balance, flexible work arrangements, and purposeful work more than older generations. This shift in priorities reflects their desire for a more holistic approach to life, which should be considered by financial brands when developing products and services tailored to their needs.

Take Action at Your Bank or Credit Union Today

As Gen Z's banking habits continue to evolve and social media's role in their financial lives expands, financial brands must adapt its strategies to effectively serve this digitally native generation. By understanding the influence of social media, the need for a holistic approach to financial well-being, and the importance of addressing social issues, financial brands can better position themselves to attract and retain Gen Z customers.

In addition, advocating for stronger regulations on finfluencers and rethinking financial literacy programs will contribute to a safer and more effective financial landscape for all consumers.

There is a tremendous growth opportunity for financial brands to establish itself as the trusted financial brand that caters to the needs of this emerging generation embracing digital platforms and understanding the unique preferences and habits of Gen Z.

The following recommendations can help financial brands effectively engage with and serve Gen Z customers:

  • Establish a strong presence on social media platforms popular among Gen Z, such as TikTok and Instagram. Share engaging, informative, and entertaining content that appeals to their interests and resonates with their values.
  • Collaborate with reputable finfluencers to create educational content and promote financial products and services tailored to Gen Z's needs. By partnering with trusted voices, credit unions can tap into the influence of finfluencers while maintaining credibility and ensuring accurate information.
  • Develop digital tools and services that cater to Gen Z's demand for personalized, convenient, and accessible banking experiences. Offer features like mobile apps with user-friendly interfaces, seamless digital account opening, and AI-driven financial management tools.
  • Emphasize the importance of transparency, social responsibility, and ethical practices in your credit union's messaging and actions. Gen Z values authenticity and is more likely to engage with financial institutions that align with their social and environmental priorities.
  • Implement effective financial education programs that are contextual, behavioral, and measurable. Rather than focusing on generic financial literacy, create targeted programs that address specific financial challenges and goals faced by Gen Z.
  • Provide resources and support for mental and emotional well-being as part of a holistic approach to financial health. Offer financial therapy services and incorporate discussions about mental health into financial education programs and customer interactions.
  • Create a workplace culture that aligns with Gen Z's priorities, such as work-life balance, flexible work arrangements, and meaningful work. Attracting and retaining Gen Z talent within the credit union will help foster a deeper understanding of this generation's needs and preferences.

By taking these proactive steps, credit unions can not only attract and retain Gen Z customers but also foster a more inclusive, responsible, and innovative financial ecosystem that benefits all consumers. As the financial landscape continues to evolve, credit unions that adapt and respond to the unique needs of each generation will be better positioned for long-term success.

 


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For more about financial transformation, reach out to James Robert Lay at the Digital Growth Institute.

This article was originally published on May 12, 2023. All content © 2024 by Digital Growth Institute and may not be reproduced by any means without permission.