The gen Z investors

0:00James Beckett:This is The Guardian.

0:09James Beckett:Today, are Gen Z the most financially savvy generation of them all?

0:21James Beckett:I don't need to tell anyone born in this century just how difficult economic conditions are for them, especially when you compare it to those born way before. The cliche is that Gen Z don't work hard enough but they do not value the 9 to 5. It's about the hustle not the grind. But are young people just being smarter about their money? I am 22 now. I use a StocksISA on Trading 212. A couple of my friends have decided to trade in cryptocurrency and forex. it can and has given them quite large gains.

0:59Richard Partington:I've also invested a smaller amount into some individual stocks purely because I have an interest in learning how the markets work.

1:08James Beckett:According to the World Economic Forum, Gen Z are investing far earlier than any generation before them. 72 % have begun putting their money into stocks, shares, crypto by the time they've entered the workforce. Half that number started in their teens and early 20s. A lot of it comes down to the ease of it. We have the information. It's everywhere. Podcasts, books, on social media. We have the access. You can download an investing app in seconds. You can be investing one pound in seconds. But it is being driven by a real anxiety. If I get made redundant, what will actually happen to me? I don't have a financial safety net.

1:50James Beckett:And so a lot of investing and trying to become financially free is probably out of my own anxieties. And a culture online that tells you you should be making your money work for you.

2:04James Beckett:From The Guardian, I'm Noshin Iqbal. Today in Focus, Gen Z's guide to finding financial freedom.

2:15James Beckett:Richard Partington, welcome back to Today in Focus. You're The Guardian's senior economics correspondent, so you know better than most the challenges that people are facing today when it comes to money. There has been a notable shift with Gen Z and how they're approaching their personal finance. What trends have you noticed?

2:35Richard Partington:There's been a big increase in Gen Z investing as far as generations go. And there's a lot of different reasons for that. I mean, I think it's an issue to do with the opportunities in life that people are facing. And for Generation Z, it's a hard world to be going into traditional routes to work are tougher than they've ever been. Earnings haven't necessarily been keeping place with the cost of living. Buying or renting a home is really expensive. So people are looking at different ways maybe to try and get ahead in life. And investing could be one of those routes.

3:10James Beckett:Tell me more about investing, because if you'd said to me at like 23, maybe you'd want to invest in stocks and shares, I would have heard blah, blah, blah, blah, blah, blah. Like absolutely no idea. And yet this is quite a financially savvy generation. What are they doing?

3:23Richard Partington:You know, investing has become much easier for newer generations, you know, for digital natives. It's much easier to buy and sell shares. And then we've had this boom in crypto as well, which has become an entry point for people because of its very nature of being less regulated, to begin with entirely unregulated, relative to the traditional stock market. That means that you can just buy and sell on an app without having to read reams and reams of disclosures and signing up to various financial statements that a bank might ask of you. So it feels much simpler and more instinctive.

3:57James Beckett:Are those apps popular on the business desk? You and your colleagues using the investment apps?

4:02Richard Partington:Yeah, we certainly take notice of them and we write about the companies that own them. There's a lot of established big players that are trying to get into these markets as well, like JP Morgan, a huge US bank that bought Nutmeg, a startup investment platform. And then there's lots of other traditional investment platforms that have gone to app-based processes. But I'd still say there is a degree of scepticism and caution. And I think young people definitely more interested perhaps than millennial or other generations. But people are still kind of worried about being burnt. And there isn't that degree of financial literacy that makes people entirely comfortable with this complicated and sometimes befuddling market.

4:45James Beckett:And do you know anything about how much this cohort is investing? I mean, the fact that we're always told that young people actually don't have access to that much money in particular. How much are they driving this growth?

4:58Richard Partington:I think they're a significant part of the growth driver of people investing in the market. So there was some recent research that showed about 40 % of UK individuals invest in financial markets. And almost half of that group are under the age of 35. right again there are you know reasons for that i mean later in life we want to kind of be more financially stable and investing in stock markets can be a bit of a risky thing to do so you might want to kind of keep your savings in cash whereas if you're younger you have more time to sort of ride out the bumps and the waves in financial markets and might be more willing to take a little bit of risk to see a greater degree of return the government are trying to encourage more people to invest because there has been a decline in an investing culture in the UK and earlier this year the government launched a campaign with a sort of fuzzy squirrel called savvy trying to get people to put more money into the stock market who knows how successful or well remembered that'll be in an age of savvy yeah exactly age of cuddly creatures being used to advertise various things like the mere cat yeah exactly that stands out in the mind but savvy the squirrel?

6:06Richard Partington:Not sure just yet.

6:08James Beckett:We believe almost anyone can get into investing. They just need a little encouragement. Come on, you can do it too. So instead of just squirreling away their cash, it's time to get the nation to make more of their money.

6:23Richard Partington:The government want to see more of that investment and risk-taking culture because it's not something that has been too prevalent in British society. I think in America, in the US, there's a much greater sort of investing culture than there is here in the UK. We're quite commonly here. But yeah, younger people perhaps changing the dial a little bit.

6:43James Beckett:Richard, how much do you think the change in attitudes is being driven not just by the ease of the apps, but by what we are regretfully calling finfluencers, which are people on social media who are influencing about finance? It's

6:57Richard Partington:definitely a part of it. And it can make it feel more accessible when you have somebody who you might have a greater degree of trust in than a stuffy financial establishment type figure telling you this is a good idea because you'll make money after this one day.

7:10James Beckett:I don't know, we all love Martin Lewis.

7:11Richard Partington:Yeah, we do like Martin Lewis. I was thinking more of chief executives of big banks and things like that who still have a bit of a checkered reputation from the 2008 financial crash. We haven't got a great degree of trust in our traditional banking system. It has been repaired to a degree since 2008. But for many people, there is a feeling that the big banks let people down and the idea of an alternative has compelling sort of rationale to it. I think there is certainly a sort of group, a growing group of people who think, look, we can engage in this new way of doing things that isn't so dependent on big institutions and government.

7:55Richard Partington:and that has a sort of libertarian appeal to people but can be a bit like the Wild West sometimes.

8:07James Beckett:I'm James Beckett, aka The Money Stalker. First, I invested£2 ,800 in Vanguard's FTSE Global... I post content on social media about personal finance. You do not need to outsmart the market. You need to capture the market return and keep your fees low. To try and get people interested in personal finance, interested in investing so they can hopefully build themselves a better future. You don't want to choose the invest account. You want to choose the stocks ITER account. And how did you get into that? Were you always quite financially savvy and nitrate? No, definitely not. When I started working just over 10 years ago, I was working for a consumer electronics company called Pure.

8:46James Beckett:I just discovered that I had no idea what I was doing with my money. The first paycheck landed, didn't know where it was going, didn't know what I was doing. So I just absorbed as much as possible from social media, from places like Reddit, from places like Facebook, from books. I didn't start with the mission to retire early or to become necessarily wealthy. I just felt financially insecure and felt like I needed to take control and not be working until potentially I was 70 or however long it would be. How old were you at this point? I was about 24 when I started working. I was probably earning about$24 ,000 a year.

9:20James Beckett:and so I wasn't able to put away that much just every month putting away 50 pounds a month that's increased over time as I've advanced in my career but I was just unbeknownst to me building a habit that was I think it's going to change my life because now I've built up a significant pot and that could potentially let me retire 10 20 years earlier if I wanted to do you want me asking how much probably got about 350 000 right now wow that's across my pension and my stocks and shares isa okay yeah so the goal that i'm public about and i know it might be a bit taboo or cringy to talk about but the goal i talk about now is that in 10 years by 45 i want to be financially free and that can mean different things to different people but for me it means that work is now optional i probably won't stop working but it means that if i get a bad boss i don't like i can walk away.

10:14James Beckett:If I want to travel the world for six months, I can do that. How did you go from investing 50 pounds a month to potential financial freedom, as you've called it? Yeah, as I say, I didn't start with that goal in mind. I just start with, I wonder if I'll have 50 pounds next month after I've put this in the stock market. But then as it started to compound, you know, for example, last year, I've got about 100 ,000 in my stocks and shares, ISA. And last year was a great year for the stock market. And by the way, the stock market can go down as well. But that's the sort of thing that tells me, okay, if I can get to a certain level, the money will start making its own money.

10:52James Beckett:And that's what spurred me on this whole time.

11:00James Beckett:Do you mind me asking if you have any ethical considerations when it comes to what you're investing in? I mean, some banks offer an ethical fund, for instance, and within that you'll get tech companies like Amazon and Apple. Some people may not agree even those ethical investments and only invest in green. Some people, of course, still invest in fossil fuels and the weapons industry, etc. Does any of that, what you're investing in, come into consideration? My brand of investing is globally diversified. I basically pick one fund that has thousands of companies in it. Now, it's just the top thousands of companies in the world.

11:37James Beckett:There are ESG funds that can exclude some of the non-environmental companies that people do invest in. Yeah, it's a good point. I just go for max diversification personally, which does mean that maybe a small fraction of our money will be in companies that I don't necessarily agree with. Clearly, to make a lot of money, you'd have to turn a bit of a blind eye. That's one way of putting it, I guess. I don't really see it that way. Maybe I don't agree with Elon Musk or something like that, but that doesn't mean I wouldn't invest in the company necessarily because it is one of the biggest companies in the world.

12:11James Beckett:It's just had an IPO for SpaceX. But if I was you and you want to start investing, but you want to pick and choose, you absolutely can. But I'd just make sure it's very diversified. You don't want 20 companies that you like. You need hundreds or thousands of companies from around the world. We heard from Richard Partington, one of our economics correspondents, about how it can seem a bit of a wild west online. How much is the industry, as it were, regulated? And how conscious are you of giving bad advice? Well, crucially, I don't give financial advice. So I would never tell someone what to invest in.

12:48James Beckett:That's a regulated activity. If you go on social media, the algorithm will just show you whatever content they think you'll like. And sometimes that content is going to be promoting some day trading scheme that is high risk. It might be promoting a new cryptocurrency that's speculative. A lot of this is just gambling. Yeah. So if you're a young person who doesn't want to just rely on their job and then sort of save the rest, what tips would you give for someone taking on their personal finances more seriously? What would you say? Well, I would definitely start with the pension. The pension is just an investment account.

13:22James Beckett:People don't realize that. they put some money in and forget about it, but it's yours to invest. It's yours to manage. You have to take that on. There is a rule that says half your age at the time you start putting money in your pension is the percent that you put into your pension. So for example, if you're 30 years old and you're just starting your pension, you would put in 15 % for the rest of your life. 15 % of your salary? Yes. That's why if you start at 20, you only need to put in 10 % for the rest of your life. And that also, by the way, doesn't include the employer match. So if you put in 7.5 % and your employer puts in 7.5%, that's 15%.

14:02James Beckett:So savings account, I would start with your emergency fund, and you need to work out what's about three to six months of your expenses. Get that in savings first, and then start investing in a stocks and shares iso. You can literally start from one pound. The most important thing is starting and building the habit. it. How would you describe Gen Z's attitude to money compared to generations before? Well, I think if they're anything like me, they probably share some money in securities. I'm worried about what AI might do to my full-time job. I was worried about student loans for a long time. I think there's a lot of worries that they have.

14:38James Beckett:And there's probably maybe a little bit, I want to say, resentment that the baby boomer generation had this massive housing boom and they got a lot of wealth through that. The only avenue that's opened up is this investing avenue. That's the only difference that I don't think the previous generations have engaged with. James, in May 2024, you posted a video saying that you regretted investing in your 20s. As someone that pushes investing a lot, that's quite hard to say, but there's two key reasons why you might want to consider... Can you explain why and why so many financial influencers suggest otherwise?

15:12James Beckett:What I did was really stretch myself. I was owning, as I say, like 24 ,000. And I started putting quite a lot of money away to the point where I wasn't actually doing things. So you weren't living? Possibly not as much as I should have been. Turning down opportunities to go away with friends or things of that nature. When you're in your 20s, you're typically on quite a low wage. You might not be able to invest that much at this stage. And putting 100 pounds away each month might be a big sacrifice. There's a community called the FIRE community. financial independence retire early. These are people that are investing 70, 80 % of their paycheck every month, living very frugally.

15:53James Beckett:But they're on track to retire maybe in their 40s, some in their 30s. They're crazy, crazy people. I say that, I'm probably part of that community technically, but you have to find this balance. But what about the risk of losing it all? When you talk about investing, it sounds like it's a surefire bet, but of course it isn't, right? No, all investing carries risk for sure. It's very volatile. But there are different levels of investing. Cryptocurrency and day trading strategies, these are high risk strategies where you can lose all of your money. If you are in a globally diversified, what's called ETF, an exchange traded fund or an index fund, the risk of losing everything is extremely low because that would mean that every company in the world has gone to zero.

16:37James Beckett:It's the apocalypse. Money no longer matters. So there's definitely tears. The point is you have to be in the stock market for, I say, at least 10 years to ride out that volatility. Otherwise, there is a chance that you could have less than when you started. The thing that most people are worried about is if the stock market's at an all-time high, which it's close to right now, people are like, well, is this a bad time to start investing? If we're in a massive recession, Trump's just announced some new tariffs and the stock market's down. Everyone's like, well, is this a bad time to start investing?

17:08James Beckett:The reality is the best time to start investing was 20 years ago. The second best time is now. Coming up, are young people at risk of trying to stretch their money too far?

17:36James Beckett:Richard, there was a report published recently, admittedly, by Vanguard, an investment app that said a third of Gen Z choose crypto as their first investment versus 9 % of Gen X. Why do you think that is and why do you think it's so appealing despite the risks?