International Getting to Know Soft Saving, Saving Pension Funds Like Gen Z Entrepreneurs – 7 hours ago

Jakarta, CNBC Indonesia – For most people, their goal in life is to work hard and save as much as possible. So they can retire early in peace.

However, this trend does not apply to generation Z workers. Most young people today challenge traditional ways of thinking by soft savings.

What’s that?

This refers to saving a little for the future. Soft saving refers to setting aside less for the future and using more money for the present.

The Prosperity Index study conducted by Intuit stated soft savings attended for the first time because generation Z is a generation that prioritizes experience over money.

“Soft savings is life’s soft answer to finances,” the report was quoted as saying CNBC InternationalTuesday (24/10/2023).

A relaxed life is a lifestyle that prioritizes comfort and low stress, prioritizing personal growth and mental health.

The report found that the approach to investing and personal finance by Gen Z or those born after 1997. is softer than in previous decades.

Liz Koehler, chief advisor for BlackRock’s Wealth Advisory business, said this means young investors are more likely to put their money into causes that reflect their personal views. They also seek emotional connections with the brands and professionals they choose to interact with.

Decreasing Saving Rates

Young workers have a desire to escape restrictive financial constraints. According to an Intuit report, three out of four generation Z would prefer a better quality of life to extra money in the bank.

In fact, the current level of personal savings among people, especially in the United States (US), seems to reflect a weak savings trend. According to the US Bureau of Economic Analysis, Americans are saving less in 2023.

The personal savings rate, which is the portion of disposable income set aside for savings, was lower at 3.9% in August, compared with an average of 8.51% in the past. This data has also been recorded by Trading Economics since 1959.

Vice president of financial consulting at Fidelity Investments, Ryan Viktorin, said one of the reasons for the decline in personal savings was the recovery from the Covid-19 pandemic. Most gen z are trying to make up for lost time.

“Because Americans have spent significantly less during the pandemic in the last two to three years, people are now likely to spend more money to make up for lost time,” he said.

Apart from that, inflation also makes it difficult for people to cover expenses or save. The decline in personal savings rates also reflects changing financial goals among today’s workers.

Shopping, Shopping, Shopping

However, there is still one question remaining. Where are people directing their money as they spend more and save less?

A study conducted by Intuit found that millennials and Gen Z are more willing to spend money on hobbies. In fact, making purchases is insignificant compared to Gen X and boomers.

About 47% of millennials and 40% of generation Z expressed a need to have money to pursue their interests or hobbies, compared to only 32% of generation X and 20% of boomers. Experts highlight travel and entertainment as one of the non-essential experiences prioritized by the younger generation.

Head of investor behavior at investment management firm Vanguard, Andy Reed, said Generation Z spending on entertainment increased to 4.4% in 2022. This compares with 3.3% in 2019.

Even though the younger generation is saving less, that doesn’t mean they are living paycheck to paycheck. In fact, Gen Z appears to be living within their means and the increase in spending seems to reflect rising prices of basic necessities rather than an increased appetite for luxury.

[Gambas:Video CNBC]