Eighty-two per cent of Gen Z investors in the US started their investment journeys before turning 21, a sentiment echoed by 79 per cent of their Canadian counterparts, 81 per cent of UK-based young investors, and 63 per cent of Chinese Gen Z investors.
Additionally, an American Express survey unveils that millennials and Gen Z also prioritise financial goals and it is one of their top New Year’s resolutions for 2024. With such interest in the financial space, this demographic–also known as Zoomers–are now exploring various ways to make their financial status better. The strategies to meet their financial priorities are AI-driven smart savings accounts, interest-earning lending apps, gaming finance (GameFi), decentralised finance (DeFi) money markets, and financial literacy and education.
While some of these sound daunting for the average person, many Zoomers are leveraging technology and online resources to demystify these concepts and integrate them into their financial strategies. This new-age approach helps them navigate and capitalise on the latest innovative financial tools.
AI-driven smart savings accounts
Gen Z has the broadest accessibility of technology, particularly through smart savings accounts and financial tools. A vital component in this financial revolution is the integration of Artificial Intelligence (AI) in financial services.
AI’s role in finance is multi-faceted, with 85 per cent of financial firms reporting they are currently using AI. The usage of AI in the financial industry could grow to 23 per cent by 2025.
In addition, AI-suggested savings apps are emerging and changing the way Gen Z approaches saving. These platforms use sophisticated algorithms to analyse spending patterns, income, and financial goals, suggesting optimal savings strategies tailored to individual needs.
Wally, for example, is an automated finance app that simplifies budgeting by tracking and categorising expenses, income, and bills from your linked financial accounts. Cleo, another AI app, features an interactive chatbot that offers basic financial advice and advanced insights.
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Interest-earning lending apps
Interest-earning lending apps are attracting Gen Z and other consumers because of their simple registration processes and fast approvals. These platforms, both centralised finance (CeFi) and decentralised finance (DeFi) provide innovative ways for individuals to grow their savings. There’s a significant demand for digital lending globally, with its market size expected to reach US$795.34 billion by 2029.
Peer-to-peer (P2P) lending apps are gaining popularity among Gen Z and other consumers as innovative savings growth avenues. Platforms like 12 per cent Club, for instance, offer users the opportunity to earn a return of up to 12 per cent on investments.
CeFi platforms are akin to traditional banks but operate digitally. They offer loans and interest-bearing accounts. In DeFi, Compound is one of the popular DeFi lending platforms. Users can lend any supported cryptocurrency on Compound, and they can borrow any cryptocurrency that is in demand.
By leveraging these platforms, Zoomers are actively taking part in their financial domain, and trying to maximise their earnings in ways that align with their digitally native lifestyles.
Earning through GameFi
GameFi, an industry that blends gaming and finance, gives power to the players by offering sophisticated gameplay mechanics that reward them with monetary incentives for having fun. The GameFi strategy is projected to reach US$90.51 billion by 2031 and could find relevance in the broader market once the traditional gamers realise its potential.
One of the success stories in this space is Axie Infinity, a game where players breed, raise, battle, and trade adorable digital critters called Axies. In the Philippines, Axie Infinity helped people earn money during the COVID-19 pandemic.
Furthermore, platforms like The Sandbox also exemplify the GameFi model that enables demographics who are on the lookout for new and innovative ways to merge their digital lives with financial opportunities.
DeFi money markets
DeFi money market protocols are revolutionising financial interactions, providing new avenues for staking, lending, and borrowing. This move towards autonomy and higher returns especially appeals to Gen Z, who favour digital, transparent, and decentralised finance, aligning with their preference for technology and innovation.
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One example of this is Scallop, a next-generation money market with lending and borrowing for digital assets. Utilising Sui’s Move language, it offers a secure and user-friendly money market protocol. Its institutional-grade features and focus on accessibility have established Scallop’s growing user base on the Sui blockchain, being the fastest-growing DeFi protocol and the first to reach a total locked value of US$160 million by March 2024.
The decentralised platform has processed US$24 billion in lending and borrowing and US$2 billion in flash loan volume. Additionally, Scallop has gained a strategic investment from DWF Labs, a leading Web3 investor and market maker, which will help boost its presence and drive innovation.
Scallop allows users to borrow and lend a variety of assets, including major stablecoins like USDC and USDT, as well as SUI and yield-earning assets like afSUI. Additionally, projects like Typus, Kai Finance, and SuiPearl, built on Scallop, enhance user access to on-chain money markets.
Aave, a decentralised lending and borrowing protocol, is another player. It allows users to lend their assets and earn interest or borrow assets by providing collateral. It has democratised access to credit and interest-earning opportunities, making it another significant platform in the DeFi ecosystem.
Financial literacy and education
Financial literacy and education are crucial for Gen Z’s empowerment, forming the basis of effective wealth management. In 2023, Americans lost an estimated estimated US$388 billion because of their lack of financial knowledge.
Gen Z can benefit from financial literacy resources, gaining essential money management skills and preparation for their financial future.
Final thoughts
The finance domain is complex, yet anyone with enough patience and understanding can achieve such long-term success. Zoomers with innovative and forward-looking financial strategies can not only reshape how they approach money management but also redefine fiscal responsibility.
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