Gen Z: Are You Ready to Start Investing?

With many mobile apps and trading platforms to choose from, it has never been easier to start investing. We look at how Gen Zers are making investment decisions and whether it is too easy to be influenced by social media platforms, such as Reddit and TikTok.

Kristina Fox Published on 07 January 2022. Last updated on 11 January 2022.
Gen Z: Are You Ready to Start Investing?

Is Gen Z interested in investing?

If you are part of Generation Z, broadly categorised as young people between the ages of nine and 24, then you might see investing as a craze to get stuck into.

Since March 2020, Google Play’s top 10 investment apps have garnered around 1.6 million new users. As the outside world ground to a halt as a result of Covid-19, it seems that many people began considering the financial options that the digital world could offer.

According to the Financial Conduct Authority (FCA), young investors are engaging with investments because of the “challenge, competition and novelty” that investing offers.

It seems that if you are young, you might be more interested in short-term thrills rather than financing future plans like retirement. Younger investors seem to view investments as a form of gambling. Over three-quarters of 18- to 40-year-olds surveyed by the FCA saw it as a competition between friends and family, while over two-thirds (68%) said investing was similar to gambling.

What is more, only around one fifth (21%) planned to keep their most recent investment for more than a year, emphasising the short-term mindset of some younger investors.

So if you are taking an interest in investing, you need to ask yourself: is it more of a short-lived game rather than a serious financial decision with real-life consequences for you?

What investments are young people being drawn to?

Cryptocurrency

Cryptocurrency appeals to many Gen Z investors – perhaps you might see it as more accessible than traditional stock markets. Our own NerdWallet research published last year found that almost a third (31%) of those aged between 18 and 24 years old would prefer to invest in cryptocurrency than save into a pension, compared with 11% across all the age groups surveyed.

Funny, meme-related names for some digital currencies, plus adverts on social media sites, such as Twitter and Facebook, lure young people into investing in cryptocurrency, often without proper explanation of the risks associated with this form of trading.

Cryptocurrency is volatile and wholly unregulated in the UK. The FCA advised in January 2021 that you should be prepared to lose your entire investment, and has expressed concern over young people’s vulnerability to this unpredictable market.

» MORE: Learn about the risks involved with cryptocurrency

‘Meme stocks’

During the January 2021 lockdown, the value of American retailer GameStop’s stocks sky-rocketed. Users of social media platform Reddit fuelled the rise, creating a social media buzz which encouraged some to invest for the first time.

GameStop is just one of a number of ‘meme stocks’ – stocks whose performance is largely driven by commotion on social media sites such as Reddit – that young people are taking an interest in.

You might have first become interested in investing when you heard about this phenomenon. The GameStop saga pushed 10% of Generation Z in the UK to invest for the first time, with many taking advice directly from platforms such as Reddit, according to research compiled by F&C Investment Trust.

However, you should be careful when considering this type of investment. The popularity of some stocks may stem from funny memes or posts on social media, but this does not mean that you should see them as any less of a risk when choosing whether to invest, as all the usual risks associated with any investment still apply.

Nikhil Rathi, the CEO of the FCA, referenced GameStop specifically when warning against the risk of seeing investments as just a bit of fun.

Exposure to financial services, such as investments, at a young age could be a threat to your finances if accessibility comes at the expense of a clear explanation of the risks.

Where do young people find investment advice?

As you are part of a tech-savvy generation, it perhaps comes as no surprise that Gen Zers are looking to social media for help. According to a 2021 survey by the debt management company Lowell, a fifth of young people aged 16 to 24 use social media platforms to find financial advice.

However, platforms such as TikTok and Reddit can be a minefield if you are trying to find trustworthy tips. It’s possible that some influencers have a financial incentive to promote a product, rather than simply posting about something they genuinely like or enjoy. This can often make it difficult to distinguish the true reason for the promotion. It also means that you may find that some influencers will promote products with little knowledge of the services they provide.

What is more, formats such as TikTok’s short, snappy videos and Twitter’s snippets of text allow little time or space for explaining the risks of investing.

It is important to do your own research before following financial suggestions from social media influencers.

» MORE: Can influencers be trusted for financial advice?

Starting to invest

As a young person, you might be considering your investment options for the first time. When thinking about investing, it is important to do your research thoroughly before diving into anything.

In the UK, you must be at least 18 years old to invest. This includes opening a stocks and shares ISA and using mobile trading platform apps.

Junior stocks and shares ISAs are available to children and young people under the age of 18, but they must be set up by a parent or guardian.

There is no legal age requirement for investing in cryptocurrency as it is unregulated in the UK, but many platforms require users to be 18 to register.

» MORE: What to think about before investing

Given Gen Z’s increasing awareness of the need to be environmentally-friendly, you may want to consider ethical and sustainable investment options to align with both your values and your financial future.

Anyone looking to invest must be aware of the differences between investment methods and platforms, as well as the risks associated with all types of investment. For general guidance, read our investment guide on how to get started.

WARNING: We cannot tell you if any form of investing is right for you. Depending on your choice of investment your capital can be at risk and you may get back less than originally paid in.

Image source: Getty Images

About the author:

Kristina is a writer at NerdWallet. A recent Oxford University graduate trading French for finance, she has experience creating content for student newspaper Cherwell and an edtech company. Read more

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