How to increase your savings rate among Gen Z?

Gen Z adults aren't saving their money.

A recent Bank of America survey found that only 15% of Gen Z regularly saves a portion of their paycheck, while just 1 in 5 Gen Zers contribute to a retirement account.

An overlapping sample of 1,091 adults aged 18 to 27 and 1,097 responses from adults aged 18 and older were gathered through a survey. Gen Z is typically defined as individuals born between 1997 and 2012.

Despite being under 30, Gen Zers have ample time to establish sound financial practices and accumulate savings.

According to Douglas Boneparth, a certified financial planner and founder of Bone Fide Wealth, becoming financially secure is not an immediate process. He advises young adults to disregard any influence from social media or those around them and prioritize their financial well-being.

"He advises that everyone's financial situation is unique, and the key to success is to focus on oneself and manage what is within one's control. While saving is important, it is the discipline around managing money that is even more crucial."

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Winnie Sun, a CFP and co-founder of Sun Group Wealth Partners, emphasizes that Gen Z's youth is an even greater reason to start planning for their financial future.

"According to Sun, there are two ways to build wealth when you're younger: either you already have wealth and simply accumulate more, or you have a lot of time to save and invest small amounts that will grow significantly in the future."

To build up both your short-term and long-term savings, follow these three steps.

1. Manage your monthly earnings

To become financially disciplined, you can start by monitoring your expenses and the money you have left over.

Consider how to allocate your remaining $500 wisely, rather than overspending, advises Boneparth. This simple technique can help you develop the habit of taking a moment to reflect on your financial goals and long-term plans.

If you have a good week, you may be tempted to indulge in impulse shopping. However, it's wise to take a moment to assess how that would affect your financial goals, advises.

Sun recommends that if you're in your 20s, you should adjust the percentages for dividing your earnings to put 25% toward savings for at least 10 years.

2. Save enough for a rainy day (or a few)

It is advisable to start saving for potential worst-case scenarios, such as losing your job, even if you haven't yet developed financial discipline. Boneparth recommends setting aside enough money to cover three to six months of your living expenses.

Consider a more ambitious goal of six to nine months' worth of expenses, but always keep in mind what you may need to survive if your cash flow is disrupted, he advises.

Boneparth suggests considering how to allocate the $1,000 monthly savings that results from earning $5,000 and spending $4,000.

3. Evaluate your goals

After accumulating enough savings to live comfortably for three months, it's time to establish objectives, including paying off student loan debt, purchasing a home, or saving for retirement.

Boneparth suggests taking into account the following three factors when planning your financial future.

1. What is the estimated cost and time required to achieve your financial goals?
2. When do you want to achieve each goal?
3. Which goals do you want to prioritize?

Boneparth explains that priorities help determine which goals will receive funding first or in greater amounts.

To create an effective savings plan that aligns with your lifestyle and future aspirations, you should take into account three key factors.

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