For decades, Canadians worked hard and saved aggressively to retire as soon as possible. At least, that’s been the goal. But those times may be changing as Generation Z enters the workforce.
Some members of Gen Z, particularly those now in their late teens and early-to-mid-20s, appear to be taking a more measured approach to work and money amid the rapidly rising cost of living and a continuously volatile economic environment. And given people are living longer, which requires more retirement savings, Gen Z could be the first generation to normalize people working into their 70s and 80s.
Still, Gen Z appears to be taking this in stride by embracing a trend known as “soft saving,” the idea of prioritizing personal and mental well-being over a focus on beefing up their investment portfolios. It’s about living for today and minimizing daily stress rather than worrying endlessly about the future.
Living for the moment
When killing time on your phone, you’ve undoubtedly come across countless life hack videos. Sure, some are suspect, but many show off this generation’s ingenuity and problem-solving skills.
Scroll through TikTok and you’ll get a master class on soft saving tips, covering everything from stretching your food budget to a 100-day envelope challenge that can help you squirrel away $5,000. What these videos have in common is that they’re about living smarter with the money you have.
A recent survey from the financial technology platform Intuit bears this out. 1 Three out of four Gen Zers in the survey said they would rather have a better quality of life than extra money in the bank. Moreover, about two-thirds of those surveyed said they’re only interested in finances to support their current interests.
Dousing the FIRE movement
Gen Zers appear to be re-evaluating what a successful career looks like. In contrast to previous generations, this cohort seems to have a willingness to limit “billable hours” in exchange for more flexibility about how they spend their time.
They stand in sharp contrast to the millennials who popularized the Financial Independence, Retire Early movement, known as FIRE, which emphasized extreme financial sacrifice as a means to stop working sooner.
These millennials took on side hustles, flipped properties and sunk their savings into riskier ventures in the hope of getting a bigger payoff. And for some, it worked, with a few fortunate ones retiring early. But other FIRE practitioners found early retirement could come at a cost. It was possible to get bored, the realization being that there is more value to work than a paycheque. The path of soft savers appears to be a more measured approach to both work and leisure.
Saving smarter, not harder
The Intuit survey shows two-thirds of Gen Zers aren’t sure they’ll ever have enough money to retire amid ongoing economic challenges. For them, the solution appears to be to work and save smarter, not harder.
Soft saving is an offshoot of the “soft life” trend, driven by Gen Zers who prefer to focus on quality of life with less stress. The revitalized subculture around thrifting is a prime example.
Beyond the money these types of activities can save, Gen Z may see things like thrifting as a way to improve their quality of life in the future by making spending decisions that help the environment today. In some ways, this lifestyle could be a by-product of the socioeconomic shifts caused by the COVID-19 pandemic, which changed how most people work and live. Gen Zers seek a balance between the two.
You can see how this same philosophy is shaping how this generation approaches work. Many embrace the new remote and hybrid work paradigm as a way to improve their quality of life. And rapid technological advancements like ChatGPT aren’t seen so much as a threat as they are a way to reshape the way work is done.
Can soft saving work?
Prioritizing your quality of life over work and savings doesn’t mean you aren’t thinking about tomorrow. As you save money and find effective new ways to lower your spending, consider putting those funds to work.
Setting up a pre-authorized transfer to your investment account, for example, could help you put aside extra money each month to help you enjoy more financial freedom over the long term. Don’t underestimate the power of compounding on your investments. This method of reinvesting income earned within your portfolio can help your savings grow exponentially. Learn more here.
At a time when it feels like everyone is trying to get into your wallet, a Tax-Free Savings Account (TFSA) or a First Home Savings Account (FHSA) can also help you hold onto your money by reducing how much tax you have to pay. If you think you want the freedom that comes with renting, you can still use a TFSA to save for the future without jeopardizing your ability to access your money if you need it.
The Intuit survey suggests Gen Zers are financially savvy and have more access to saving and investing information than any other generation, but may need some help harnessing that knowledge. TikTok videos aside, there are other steps you can take, such as investing, that can help you boost your savings.
Don’t fret if you’re not sure where to start. About two-thirds of respondents to the Intuit survey say they know it’s important to invest, but don’t know how. Go at your own pace and do your research to make sure you’re comfortable with the risk.
Financial literacy is important at any age, but it’s especially important when you’re still young and have fewer financial resources. Losing money on the latest meme stock or investing in speculative areas, such as cryptocurrency, can set you back on near-term goals, like buying your first car or building up a down payment for your first home. (The Intuit survey shows about half of Gen Z respondents bought cryptocurrency even though they don’t fully understand blockchain.)
Life changes fast
As your goals shift over time, a soft saving strategy and the financial habits you’re developing today can become the foundation to manage your financial needs in the future. Good money habits could be vital if reports about the looming Great Wealth Transfer prove true. Those reports say that over the next few decades, an estimated $1 trillion could pass on to younger generations of Canadians from parents and grandparents.
TikTok tips can help you save more by trimming your spending, but few have much to say about the steps you can take to put those savings to work. By investing early, you support your future goals as well — and what could be better for your well-being than that?
- “Gen Z Would Rather Talk About Anything But Their Finances”, Intuit, January 21, 2023, https://www.intuit.com/company/press-room/press-releases/2023/gen-z-would-rather-talk-about-anything-but-their-finances/ ↩