A New Way to Save
There’s a new money saving trend that the Gen Z crowd (and even some millennials) believe is the way of the future—but it's leaving experts feeling wary for their future.
What Experts Suggest
Experts have always advised us to cover your bills, pay down your debt, build and emergency fund, and save for retirement.
Stressful Financials
But for many of us, there’s not enough money left over to comfortably save—and catching up is stressful. In fact, just covering the bills in full is stressful enough these days.
Finding a Balance
Gen Z has come up with a way to find a balance between living in the present and preparing for the future.
Prioritizing Mental Health
They call it, soft saving, which emphasizes personal growth and mental health instead of worrying about future financial security.
Soft Saving
Soft saving is a form of “soft living”, which is a lifestyle that focuses on being fulfilled, setting boundaries and ditching the traditional hustle culture.
Essentially, it means, working to live—not living to work.
Opinions
The Gen Z group says they don’t exactly do it on purpose, or at least not at first. Soft saving is something they seem to do by default—as a natural reaction to the way the world is today.
A Realistic Approach
It’s not that they don’t care about retirement, or having financial literacy—they just have a more realistic approach to saving money.
Less Stress
Soft saving focuses on embracing the present, with less weight on budgeting and a lot less stress on investing.
It rejects what previous generations have been chasing for years.
Previous Generations Approach
For generations before them, people have been programmed with a “rise-and-grind”, “make-it-or-break-it” approach to financial wellness—which has caused an immense amount of stress for many.
The FIRE Movement
One particular financial movement popular among the boomers is referred to as FIRE, which stands for “financial independence, retire early”.
Life Fulfillment Goals
But Gen Zers don’t want to wait until their later years to enjoy life. According to a study by the Prosperity Index, 73% of Gen Zers say they’d rather have a better quality of life than extra money in the bank.
How Its Done
This means that Gen Zers find it more important to achieve a work-life balance, pursue hobbies and enjoys things like travel, rather than push harder for a promotion, find extra work or cut out discretionary expenses.
What Started This Trend
Gen Zers are the ones who are just starting their financial journeys and have already been affected by a turbulent economic environment, complete with: a global pandemic, record-high inflation, mediocre wages, soaring interest rates, and impossible student loan payments.
A Disadvantage
According to Consumer Affairs, Gen Zers have 86% less purchasing power than Baby Boomers did in their 20s. They pay far more for essentials like food, housing and gas, and they have much more debt.
Lobur Alexey Ivanovich, Shutterstock
A High Cost of Living
Inflation has become a serious problem for the younger generations. More than half, or 53%, of Gen Zers say a high cost of living is a barrier to their financial success, according to a survey from Bank of America.
Student Loans
Even though they have a more relaxed approach to saving, Gen Zers still prioritize education.
This is evident in their immense student debt payments—which are drastically higher than the generations before them.
PR Image Factory, Shutterstock
Student Loan Payments
According to Bankrate, the average Gen Z borrower has an outstanding student loan of at least $24,473—most are much higher.
Economic Uncertainty
The economic uncertainty doesn’t just affect how we spend, save and invest—it also affects how we view the future.
Hesitant to Save
According to a study done by Intuit, nearly three-quarters of Gen Zers say the economy makes them hesitant to set up long-term financial goals, and two-thirds of them aren’t sure they’ll ever have enough money to retire.
Home Ownership
For most Gen Zers, the notion of building wealth through home ownership feels completely out-of-reach.
Due to rising home prices and high mortgage rates, many have accepted that they may never own a home.
The Here and Now
Instead, they have chosen to focus on the here-and-now. Which does still include paying down debt, but also prioritizing their happiness.
Expert Opinions
While experts agree that soft saving can be beneficial to mental health and wellness, they still believe a balance between short-term happiness and long-term financial security is important.
Personal Choice
According to Bola Sokunbi, founder of Clever Girl Finance and CNET expert review board member, “The choice between prioritizing quality of life over long-term financial health is really a personal one, and it all depends on the individual’s values and circumstances”.
The Future
Sokunbi also said, “the future is not predictable, but we are living longer on average than past generations, and we need to be able to take care of our future selves,” reminding Gen Zers not to completely ignore future financial stability.
Do Both
It’s very possible to have a ‘soft savings’ approach and still put something aside for the future. There are ways to change our spending while still enjoying life, and still put aside a few bucks here and there for the future.
Is soft saving a bad financial move?
Gen Z has different ideas of what it means to be successful and propser—which is their whole idea to soft saving. But according to Bernadette Joy, a personal finance coach, “you don’t have to sacrifice your quality of life to improve your prospects for financial stability”.
Investing
“Investing in personal growth and mental well-being are important investments to make so that you can invest actual dollars in the future,” said Joy.
The hope is that one will lead to the other.
Paving the Way
“But at some point,” Joy continues, “the hope would be (even if it takes years) that the investment in mental well-being will allow the person to focus on investing for the future”.
Focusing on What’s In Their Control
Gen Zers don’t want to live paycheck to paycheck. But with huge macroeconomic barriers, it feels healthier to focus on what is in their control.
Retirement is Too Far Away
Which is why they focus more on building an emergency fund than a nest egg for retirement that is 40-something years away.
How to Prioritize
While we understand Gen Z’s approach, and it can even sound appealing to the right person, it is important to prioritize the right things.
At the very least, pay your bills, open up a high-yielding savings account, and contribute what you can to your 401(k).
Bottom Line
The bottom line is, you can take a “soft savings” approach and emphasize your present needs, but you don’t have to sacrifice your long-term financial goals entirely.
It’s all about balance.
