Gen Z is Ready to Invest and Crypto is Their Primary Option

Generation Z, otherwise known as Gen Z or Zoomers, refers to the demographic category comprised of people born between 1996 and 2010, following Millennials. Like all other generations, Zoomers have their own identity, preferences, and investment habits that differ greatly from their predecessors.

Gen Zers grew up in a world where tech advancements ensured easy access to financial education, and topics like the rise of digital currencies or the latest developments in the Bitcoin and Ethereum price were commonplace on social media and beyond. So, it’s not at all surprising that they take a different approach to investment compared to previous generations and have money management ideas that some might find unusual or even unwise. Studies and statistics reveal just how much their investing behavior differs and, at the same time, help us gain a better understanding of their financial habits.

A Generation of Precocious and Bold Investors

One of the first aspects to stand out when analyzing Zoomers’ relationship with money is the fact that they start investing much sooner than Millennials, Gen X, baby boomers, and other generations before them. Data provided by the Financial Industry Regulatory Authority (FINRA) and finance non-profit CFA Institute shows that Gen Z wastes no time when it comes to investing.

We’re talking about people aged 13 to 27 at the time of writing who didn’t have much time to accumulate wealth or gain extensive experience as investors. And yet, according to the FINRA report, it seems that over half of Gen Zers in the U.S. (56%) have already invested different amounts of money into various assets. What’s more, the vast majority have taken the first step toward investing at a very young age: 25% began investing before turning 18, and 82% took the leap before 21.

It’s not just the age they start investing at that differs from older generations but also the investment vehicles they choose. 55% of the Zoomers who have already started their investing journey choose to put their money into crypto; 19% of them invest in digital assets exclusively, 41% hold investments in individual stocks, 35% opt for mutual funds, and 25% dabble in nonfungible tokens (NFTs).

If we draw a comparison with Gen X’s investing habits, we can see the differences are pretty stark. For this category of investors born between 1965 and 1980, mutual funds were the most appealing investment venue, held by 47% of them. Individual stocks followed after (43%), and only 39% of them considered crypto a viable investing option.

For 41% of Gen Zers, the infamous fear of missing out, commonly known as FOMO, served as the main motivation to start investing their money into different assets. With news of investment opportunities coming at them from all sides, and especially from social media, it comes as no surprise that people from this generation feel great pressure to take action and put their money to work. Examining different investment possibilities is essential, and keeping abreast of optimal bank savings interest rates can prove to be a prudent strategy for consistent and dependable returns.

Social media is also the main source of information for half of Gen Z investors. Given the convenience they offer, most young investors turn to YouTube videos, Instagram posts, and Google searches to find the information they require and ramp up their investing skills and knowledge. By comparison, Millennials and Gen Z rely on more traditional methods like one-to-one meetings with a financial advisor or information that comes directly from corporate sources for accurate and actionable investing advice and guidance.

The Risks That Come with Investing in Crypto

No one can accuse Zoomers of not being brave or proactive enough when it comes to investing. Their eagerness to invest their money at a young age and their obvious interest in alternative investments such as crypto prove they’re not afraid of taking risks. But their bravery might cost them dearly if they don’t know how to mitigate financial risks. There’s a fine line between taking risks and being reckless, and not every young Gen Z investor knows the difference between the two.

Digital currencies are known for their volatility, which comes with the promise of high returns. For Gen Z, this is the main selling point for investing in crypto. Unfortunately, the same volatility that can lead to great earnings can also result in significant losses. Bitcoin’s price history provides a great example in this respect. The original crypto experienced tremendous growth over the years, making many people rich in the process. But it also suffered sharp drops in value as it happened during the last crypto winter that, caused the Bitcoin price to plummet from its all-time high of $69,000 in November 2021 to a current trading price of $ 29,223.

It’s true that Zoomers are digitally native individuals who have all the information and tools they require to make wise investment decisions at their fingertips. They also have an entire host of platforms at their disposal that allow them to ease into investing by purchasing assets with small sums of money, thus lowering barriers to entry. However, access to information and investing tools does not guarantee the proper use of it. And with FOMO as a main driver for investing, many don’t take the time to think things through and make rash decisions instead.

So, what are Gen Zers supposed to do if they want to continue investing in crypto and reduce risks at the same time? The consensus among financial experts is that diversification is the best strategy to keep risks at a tolerable level. While the earning potential of digital currencies is undeniable, most professionals advise young investors to limit their crypto investments to 1 to 3% of their total portfolio. Also, it’s safer to think of crypto as a long-term investment rather than a method to earn a quick buck. That can help Zoomers keep risks in check and increase their chances of benefiting from higher returns in the long run.

Wrapping Up

Gen Z is unlike any other generation so far in terms of investing. They’re pragmatic, tech-savvy, have a hands-on attitude, and are willing to take more risks to build wealth quickly. While these are generally seen as positive characteristics, they can also work against them if they don’t take adequate precautions.