How This ¡®Soft Saving¡¯ Trend Among GenZ-ers Is Signalling That They May Never Retire

At a time when the trend of retiring early is catching up among the millennials, it seems that GenZ is doing the opposite. Thanks to a new trend brewing up, the younger generation seems to be stepping away from the whole idea of retiring.

What Is The Soft Saving Trend?

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The ¡°soft saving¡± trend is emerging among younger workers, which is challenging the traditional way of thinking about the concept of retirement.

The term 'soft saving' refers to putting less money into the future, and using more of it for the present. Gen Z, which is seen as a generation that puts experiences before money, is leading the so-called soft saving wave, according to the Prosperity Index Study by American software company Intuit. ¡°Soft saving is the soft life¡¯s answer to finances,¡± said the study, as reported by CNBC.

How Has Soft Saving Become GenZ's Answer To A 'Soft Life?'

A ¡°soft life¡± is a lifestyle that embraces comfort and low stress, prioritising personal growth and mental wellness. The report found the approach to investing and personal finance by Gen Z ¡ª those born after 1997 ¡ª to be ¡°softer¡± than previous decades.

But what does that mean? It means younger investors tend to put their money into causes that reflect their personal views. They also seek an emotional connection with brands and professionals they choose to engage with, Liz Koehler, head of advisor engagement for BlackRock¡¯s U.S. Wealth Advisory business, as per the CNBC report.

Also Read: How To Calculate Your Retirement Corpus Amount?

Why Are Youngsters Saving Less?

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Younger workers have the desire to break free from restrictive financial constraints. Three in four Gen Z-ers would rather have a better quality of life than extra money in their banks, Intuit's report shows.

In fact, personal saving rates among Americans today seem to mirror the soft savings trend.

According to the U.S. Bureau of Economic Analysis, Americans are saving less in 2023. The personal saving rate ¡ª the portion of disposable income one sets aside for savings ¡ª was significantly lower at 3.9% in August, compared to the 8.51% average in the past decade, according to data from Trading Economics which goes as far back as 1959.

Even the term 'funflation' is also the result of youngsters spending more on experiences such as vacations, concerts etc to make up for the lost time due to covid-related lockdowns and other restrictions in the previous few years.

The decrease in personal saving rates also reflects a change in financial goals among workers today. As younger people enter the workforce, they bring in new financial priorities and are more likely to embrace a ¡°balance between the traditional ¡®hustle¡¯ to save every single penny and using some of their extra income to enjoy life now, the report mentioned.

Why GenZ May Never Retire At All

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Retirement is the grand finale for most employees after working hard for multiple decades. However, more are concerned they may not be able to retire at all. A report by Blackrock shows that in 2023, only 53% of workers believe they are on track to retire with the lifestyle they want. A lack of retirement income, worries over market volatility and high inflation were some of the reasons cited for a lack of confidence about retirement among workers.

Younger workers also share the same sentiments, where two in three Gen Z are not sure if they will ever have enough money to retire.

However, this fear may not be that much of a concern for the younger generation, as most are actually looking to retire early ¡ª or to retire at all, the report by Intuit showed. Additionally, the Transamerican Center for Retirement Studies found that almost half the working population either expects to work past the age of 65 or do not have plans to retire.

Traditionally, retiring entails leaving the workforce permanently. However, experts found that the very definition of retirement is also changing between generations. About 41% of Gen Z and 44% of millennials ¡ª those who are currently between 27 and 42 years old ¡ª are significantly more likely to want to do some form of paid work during retirement.

That¡¯s higher than the 31% of Gen X (those born between 1965 to 1980) and 21% of Baby Boomers (born between 1946 to 1964) surveyed, the report by the Transamerican Center for Retirement Studies showed. This increasing preference for a lifelong income could perhaps make the act of ¡°retiring¡± obsolete.

Also Read: All You Need To Know About '3 Bucket Strategy' That Can Help You Retire Early

What Is GenZ Spending Money On?

One question remains: where are youngsters directing their money as they spend more and save less? The study reportedly found out that millennials and Gen Z are more willing to spend on hobbies and make non-essential purchases compared to Gen X and boomers.

About 47% of millennials and 40% of Gen Z expressed a need to have money to pursue their passion or hobby, compared to only 32% of Gen X and 20% of boomers. Experts highlighted travel and entertainment as some of the non-essential experiences the younger generation is prioritising.

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