Gen Z Is Saving at Record Rates, But Beth Kobliner Says One Habit Could Destroy It All

"The number of young people with retirement accounts has increased by 36% since when we were young, and the number of 25-year-olds who own stocks and bonds is up almost sixfold. This generation, like the Depression generation, gets that they're going to need to be smart about money now because they have a lot of obstacles in their way."

"Investing automation embraced by Gen Z gets most of the credit. Auto-enrollment defaults workers into the plan, auto-escalation bumps the contribution rate each year, and target date funds replaced money market accounts as the default investment. A 23-year-old's first paycheck now buys diversified equity exposure instead of sitting in cash."

"Retirement researcher Michael Finke calls this group, in Chatzky's words, "a bubble-wrapped generation of investors, meaning we've taken such good care of them that they don't actually know what they're doing correctly." Three forces are working against Gen Z, Kobliner says. First, social media: Young people are "getting 70 to 80% of their advice from social media," often from paid promoters they know are paid."

Gen Z is enrolling in 401(k) plans at much higher rates than earlier generations while also borrowing from those retirement accounts more frequently. Retirement account ownership among young people has risen sharply, and stock and bond ownership among 25-year-olds has increased dramatically. Investing automation contributes to this progress through auto-enrollment, auto-escalation of contributions, and target date funds replacing cash-like defaults. Broader access to healthcare and low down payment mortgage programs also reduce major financial shocks. Despite these supports, behavior remains a weak link, with concerns that social media influences financial decisions and that many young savers may not understand what they are doing correctly.

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