For most people, their goal is to work hard, save money, and retire early. But a new trend, that of “soft saving” – is emerging among younger workers, challenging the traditional way of thinking.
The balance between work and personal life, as well as the prioritization of needs and experiences, characterize this new trend for a very simple reason: young workers see retirement through… binoculars.
Soft saving refers to setting aside less money for the future and using more of it for the present. And Gen Z, as a generation that values experiences over money, is leading that wave, according to Intuit’s Prosperity Index study (https://www.intuit.com/blog/wp-content/uploads/2023/01/Intuit-Prosperity-Index-Report_US_Jan-2023.pdf). “Soft austerity is the soft answer to financial problems,” the report said.
The value of gentleness
It all seems to have started from the need for soft tones. The so-called “gentle life” is a way of life that embraces comfort and keeping stress low, prioritizing personal growth and mental well-being.
This is precisely the need that Gen Z’s approach to investments and personal finances – that is, those born after 1997 – that is “softer” than in previous decades.
What does this mean; That younger investors tend to invest their money in causes that reflect their personal views.
Savings drop, goals change
The decline in personal savings rates also reflects a shift in financial goals among workers today.
As younger people enter the workforce, they bring with them new financial priorities and are more likely to embrace a balance of saving as much as they can and using some of their income to enjoy life now.
Retirement and saving
Retirement is the grande finale for most workers. However, most worry that they may not be able to retire at all.
A Blackrock report shows that in 2023, only 53% of workers (“Read on Retirement Report“) believe they are on track to retire and have the lifestyle they want. Lack of retirement income, concerns about market volatility and high inflation were some of the reasons cited for pessimism about their retirement.
Which doesn’t leave younger workers out: two out of three Gen Z-ers aren’t sure they’ll ever have enough money to retire.
But that fear may not worry the younger generation as much, as most actually want to retire early — or not retire at all, the Intuit report found.
Additionally, the Transamerican Center for Retirement Studies found that nearly (“What Is “Retirement”? Three Generations Prepare for Older Age.“) half of the working population in the US either expects to work past age 65 or has no plans to retire.
What does “retirement” really mean?
Traditionally, retirement involves leaving the workforce permanently. However, experts have found that the very definition of retirement also changes between generations.
Around 41% of Gen Z and 44% of Millennials – those aged between 27 and 42 today – are much more likely to want to do some form of paid work during their retirement. A rate clearly higher than 31% of Gen X (those born between 1965 and 1980) and 21% of Baby Boomers.
This growing preference for lifetime income could perhaps render the act of “retirement” obsolete.
Although younger workers are not planning to stop working, there is still an effort to increase their retirement savings.
How costs are broken down
However, one question remains: where are people directing their money as they spend more and save less?
Intuit’s study found that Millennials and Gen Z are more willing to spend on hobbies and make minor purchases compared to Gen X and Baby Boomers.
About 47% of Millennials and 40% of Gen Z-ers expressed a need to have money to pursue their passion or hobby, compared to only 32% of Gen X-ers and 20% of Boomers.
Experts highlighted travel and entertainment as some of the non-essential experiences prioritized by the younger generation.
In reality, Gen Z is living within its means, and their increased spending seems to reflect the rising cost of essentials more than a growing taste for luxury. That they spend money on things that really make them happy is great. But people should satisfy their short-term needs and keep an eye on their long-term goals before they spend freely – or at all.