Generation Z might be young, but they’ve got a lot of financial savvy. A study from BlackRock showed Gen Zers saving money for retirement at a faster rate than older generations, including Millennials, Generation X and Baby Boomers.
Overall, this is good news, but it does lead to one question—what should Gen Zers do with the money they save? They have their pick of several different savings or investment accounts, but is there one that will best serve their needs?
Traditional Savings Accounts
As it turns out, the best savings account for most Gen Zers is a traditional savings account, the one a bank or credit union usually gives you as a default. The reason? Most of Generation Z are just starting their first career job, and as a result are just starting their savings journey.
While a traditional savings account might not be flashy, it has a lot to offer members of Generation Z. The biggest benefit is that it gives you a place to put that money you’re saving and let it earn some interest while still keeping it accessible in case you get hit with a financial emergency. Even better, you can use Direct Deposit to automate the process and ensure that your savings will be getting built up for as long as you’re working with the job.
Money Market Accounts
While traditional savings accounts are a good place to start for any Gen Zer, if you’re putting aside at least 10% of each paycheck, it won’t take long until you have over $2,000 in your savings account. Once you do, you might want to think about transferring most of your savings into a money market account.
The biggest difference between a money market account and a traditional savings account is that a money market account has a higher interest rate. However, you also have to keep a minimum balance in your account or get charged a small fee each month you don’t. Of course, since you’ll usually be putting money into your savings more often than you’ll be withdrawing it, the odds are good you’ll be able to maintain the balance in your account once you’ve built it up.
Create your savings goals today
Certificate of Deposit
Once you’ve gotten at least two months of savings in your account, you should think about putting some of your money in a certificate of deposit, also known as a CD. When you open up a CD, you’re basically putting your money into an account you won’t be able to use for anywhere from a few months to a couple of years. During that time, your money will earn a significantly higher rate of interest than it would with a checking account.
While you don’t want to put all of your savings in a CD, it’s a worthwhile investment that doesn’t carry any risk. This makes it especially attractive during times when other investments, like stocks, are volatile.
Roth IRA
Okay, a Roth IRA isn’t exactly a savings account, but if you’re a Gen Zer saving for retirement, you might want to consider putting some of your savings into one. The money you put into a Roth IRA isn’t tax deductible, but it does offer tax-free growth and tax-free withdrawals, which makes it a great investment vehicle for Gen Zers at the start of their career.
Get a Savings Account at First Alliance Credit Union
Gen Zers have a lot of options when it comes to saving their money. For most, a traditional savings account is a good place to start, but once you have over $2,000 saved up you should think about putting your funds in a money market account, a certificate of deposit or even a Roth IRA.
If you want to find out the benefits of all these savings accounts, become a member of First Alliance Credit Union today. You can open up a traditional savings account, aka a share account, for only five dollars. Once you’ve built up your savings you can explore several other options, and our online banking platform and mobile app will help you keep track of all of them.
