Young people don’t limit themselves to traditional ways to do their finances and banking. They do their homework and forge their own paths when it comes to managing money.
So says Ronen Aires, an entrepreneur and the founder and chief executive of Student Village, a student marketing and graduate-development specialist, following recent research he conducted titled “Banking on the future”.
Aires maintains that young people aren’t following the financial habits of their parents, although they are making conservative yet flexible decisions. The younger generation is characterised by a desire to mitigate financial risk, but don’t count on their loyalty when they don’t see it as being in their interest.
“Having watched youth over the past 20 years, it’s clear that they are a lot more sussed than their parents,” says Aires. “While they are certainly more conservative with their money, they’re clearly determined to be a lot savvier and to find ways to manage their finances.”
Through his research project, Aires worked closely with students between the ages of 18 and 24 (falling into the generation group known as Generation Z) to understand what their spending priorities are, and how they handle their money. He engaged with about 400 youngsters on subjects including banking, finance, telecommunications and more to understand their perspectives.
His findings suggest that young South Africans born after 1996 are far more flexible than previous generations.
“Younger South Africans are always looking for options,” says Aires. “They won’t limit themselves to one bank or service provider the way their parents did.
“In the past, parents would take their children to open an account at the bank they banked with. While it still happens, the youth are less likely to remain in an exclusive relationship with a bank as was traditionally the case. They’re open to options that work better for them, and are willing to shop around based on their needs.”
This is also true of telecommunication services. Aires says prepaid cell phone plans are more popular than contracts among youngsters because they afford greater flexibility, enabling users to switch service providers depending on offerings like data bundles and coverage. Ease of use is also a factor, with simpler registration and sign-up far more enticing.
When it comes to saving, the younger generation typically believes in short-term goals rather than going in for the long haul.
“We saw a lot of saving for short-term goals like rainy day accounts, end- of-year holidays, or big purchases,” says Aires. “Youngsters are all about saving now for later with a foreseeable goal in sight. Where they do invest, it’s typically outside of South Africa, given the flexibility overseas savings can offer.”
Risk mitigation is key among youngsters, he says, and they’re far more credit cautious than their parents.
“A few generations ago, everyone had store accounts, leveraging credit wherever it was offered. Many youngsters saw their parents get into trouble, and have become somewhat credit shy, which is a good thing.
“They still spend their money after payday at the end of the month, but mitigating uncertainty and avoiding riskier investments is part of their approach.”
Even their expenses have become short-term, with property purchase less favoured than renting.
Says Aires, “There’s no longer that absolute need to own property. In the new phase we’re entering, we may see younger people preferring not to own cars or houses but opting to rent them instead. It all speaks to flexibility as a massive driver, not just as a way of working, but in terms of having more options.”
At the same time, a belief that money is the answer to most anxiety persists among the youth, and their flexibility also comes with a caveat that they won’t remain loyal to a brand or company which they believe doesn’t serve them.
“When we ask students what they need more of, money is generally the answer,” Aires says. “They may be more conservative, but they hold on to the notion that money can make anxieties go away.
“For years, millennials pushed for flexibility, and they met a lot of resistance. COVID-19 showed us that flexibility actually works. However, Generation Z wants flexibility and more certainty in finance, without committing to anything themselves and while expecting commitment from brands and companies.
“Youngsters want their financial relationships to be treated like a marriage while they treat them like a Tinder relationship. It’s asymmetrical”.
Aires’ findings play out among the Jewish community in both Generation Z and its preceding demographic cohort, Generation Y.
“Money is transactional in that it represents what it can give you,” says 24-year-old, third-year accounting student Meir Spector. “It has whatever value you place on it. For me, it’s about experiences and things I can share with other people.
“While I do save and invest, I don’t believe in saving at the expense of missing out on what life has to offer. It’s not about hoarding but living life while making sure there is enough money in case something happens. I invest outside of South Africa, which is about putting aside something just in case.”
Similarly, 17-year-old student Faryn Isakow believes money isn’t just a material asset but something which offers a degree of peace of mind.
“I get excited when I have some money in my card,” she says. “Knowing that I probably earned that money myself by selling my old clothes gives me a feeling of accomplishment, so each rand I spend feels a little scary to let go of.
“Investment matters to me as it’s important for your future. You aren’t only living and working for the present and the near future, but for the far future and your future family.
“I want to do as much as I can to ensure I’m comfortable when I become an adult and a mother,” she says.
Risk aversion is also prevalent among youngsters.
“The best investment really depends on the person and what they’re looking for,” says 26-year-old tech entrepreneur, Marom Mishan.
“I’m not highly invested in individual stocks because since it is not my full-time job, I can’t do it properly,” he says. “Rather, I try to engage in ventures where I can add value and have some degree of control, such as investing in my own company which creates AI [artificial intelligence] and data solutions for corporates as that is where I have the most influence and knowledge.
“My preference fits with my knowledge and expertise as an AI entrepreneur. I prefer to invest in what I know as that’s a way to manage risk.”
