24 May 2024

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Millennials and Gen Z: Savings and Investment Trends

Luigi Campopiano

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Millennials, also known as "Gen Y," and Gen Z are redefining the boundaries of consumption and savings. They are expected to change products, profitability, and impact distribution models and work patterns. By 2030, Europe is anticipated to have around 250 million potential new clients from Generations Y and Z: a group of investors interested in services and tools different from today's offerings, with nearly 60% of wealth expected to be invested in innovative products by the end of the decade.

A study by the JDM Lab at the University of Pavia, which also conducts research in behavioral finance, highlighted in the analysis by Enrico Rubaltelli, associate professor at the University of Padua and an expert in behavioral economics, the savings characteristics of Generations Y and Z based on their relationship with work:

• Gen Y (born between 1981 and 1996/2000) experienced the economic crisis and entered the workforce with a "live the moment" approach (indicating the ability to adapt to precarious jobs without thinking too much about the future). They primarily get their information from the web and have an ambivalent relationship with social media.
• Gen Z (born from 1997/2001 onwards) are digital natives with a "work is hope" approach (hoping there will be work and looking to the future without high expectations). They have a lot of trust in social media and a curious relationship with artificial intelligence.

The common characteristic of Generations Y and Z is their decreasing reliance on permanent jobs (with an increase in self-employment), leading to a completely different relationship with money and its usage compared to the past:

• They use money without knowing what tomorrow will bring, showing little interest in long-term planning, like pensions (preferring real estate over pension funds).
• Anxiety and uncertainty are key words for these generations, stemming from various life aspects (work, climate crisis, technological developments).
• They have an active approach (seeking investments on their own through word of mouth).
• They use a different language, not interested in the traditional division between stocks and bonds, preferring new technologies and fast investment solutions.
• They are fearful of the future, lacking certainties, and lack financial education.
• They suffer from Fear of Missing Out (FOMO), worrying about falling behind their friends in investment decisions and life enjoyment. They want to try successful investments.
• They also experience Joy of Missing Out (JOMO), being uninterested in major events and politics, and check news online when they have the desire and time. If they see a shortcut to wealth, like online trading, they take it.
• Important purchases for these generations include technology, travel, and housing. They have relatively low incomes, using investment as income supplementation. They prefer solutions with monthly subscriptions.
• They frequently change brands, are not loyal, and seek the best deals.

Independence and autonomy are two characteristics Millennials and Gen Z look for in financial advisors. They seek high flexibility in proposed strategies and in adjusting the weights of various asset classes, with the ability to make autonomous choices (favoring themes like climate change and gender equality).