Generation Z is showcasing impressive financial acumen by diving into investing as early as age 19, according to the 2024 Schwab Modern Wealth survey. This proactive approach marks a significant shift from previous generations, with baby boomers typically launching their investing journey around age 35 and millennials beginning at 25.
Starting so young gives Gen Z a notable advantage, leveraging the power of compound interest to build wealth over time. Even small, consistent investments made early can grow into substantial sums. For instance, a 19-year-old who invests $5,000 annually with a 7 percent return rate could accumulate over $1.5 million by the time they retire at 65. In contrast, someone who starts investing at age 25 might end up with about $998,000, while a late starter at age 30 would amass roughly $691,000. The takeaway? Time is money—literally!
Among financial advisors’ recommended tools for young new investors is the Roth IRA. This type of account involves contributing after-tax dollars and therefore offers the benefits of tax-free growth and withdrawals during retirement.
“Every young person, the minute they get their first job, should only be doing Roth IRAs if they qualify, or Roth 401(k)s,” Ed Slott, an IRA expert and certified public accountant, told CNBC. “Get the vehicle, the receptacle, the Roth IRA set up and it’s more likely they’ll make it a habit for the rest of their lives as they see their account grow.”
While the internet and social media have broadened access to financial knowledge, experts urge caution regarding advice from “finfluencers” on platforms like TikTok. Fortunately, despite the influx of unverified financial content online, more than half of Schwab’s survey respondents say social media does not influence their investment decisions.
For many folks, the shadow of student loans looms large over investment efforts. Federal borrowers under the age of 24 owe an average of $14,559, and those aged 25 to 34 hold an average of $33,081. However, financial advisors stress that debt shouldn’t deter young people from investing. They recommend starting small with retirement savings while continuing to manage debt repayment, paving the way for a financially secure future.
As the world faces economic uncertainties, Gen Z is quietly building a solid financial foundation, demonstrating that a combination of early action and informed decisions can lead to substantial long-term gains.
