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How Gen Z Should Prepare Their Finances for 2023

Building an emergency savings fund is essential as economic turmoil looms in the new year.

(Bloomberg) -- For Gen Z, it’s daunting to think about saving, investing and planning for retirement.

As young workers start their careers, the stock and bond markets have been in turmoil, with the S&P 500 headed for its worst annual performance since 2008. A recession is looming. Wages haven’t kept pace with inflationCredit card debt and interest rates are rising. Housing costs have surged. And a massive retirement savings shortfall has gotten worse.

For Gen Z, the start of the new year is a good time to do a financial health check-up, advisers say. They recommend sketching out a roadmap that balances immediate money goals, while also keeping an eye on saving for retirement, even if its decades away.

Here are five things experts say young people should do to get their finances in order for 2023. 

Personal Balance Sheet

These days, people are rarely looking at all of their income, investments and expenses in the same place, said Dustin Smith, a financial adviser at Wealth Enhancement Group. Before you can make any financial decisions, he said, you need to have a thorough and holistic understanding of where you stand. That involves carefully tabulating all your transactions, and paying special attention to things like interest rates and recurring subscriptions.

People should also factor in any major anticipated expenses, such as moving or a vacation, and build short-term savings plans accordingly, said Bill McManus, vice president and managing director of applied insights at Hartford Funds. 

Emergency Savings

The rule of thumb for savings is to have three to six months’ worth of expenses set aside for emergencies, especially if you are worried about job stability in an economic downturn.

“If you’re employed, make sure your financial health is in order, like having a cash reserve built before you pay off debt,” said T.J. Williams, a financial planner at Wealth Enhancement Group. While it may seem counter-intuitive to save before paying off loans, not doing so could push you deeper into debt or force you to sell investments that could help in the long run, he added. 

To make the most of any extra cash and shield that money from inflation, he recommends shopping around with various bank products like high-yield savings accounts and money market funds that are offering record-breaking returns. But keep in mind that some accounts may have penalties or withdrawal limits when making a decision about where to park your assets, Williams said.

Plan for Retirement 

Many companies automatically enroll employees into a 401(k) retirement savings plan — or, for non-profit companies, a 403(b) — and young people should try to take full advantage of any employer matching that is available, said Maria Bruno, head of US wealth planning research at Vanguard.

In an ideal world, you would put 10% to 15% of your monthly income into a savings plan. If that isn’t feasible right now, advisers say even 1% to 2% will make a big difference in the long run. 

Pay Down Debt

Personal debt from student loans or credit cards is not just a financial strain: It affects your credit score and therefore your ability to apply for other credit cards and mortgages. People looking to pay down debt should focus on what carries the highest interest rate, Bruno said.

The average interest rate for credit cards rose above 19% this year, driven by aggressive rate hikes by the Federal Reserve in an attempt to combat inflation. And short-term financing schemes like buy now, pay later — a risky but popular option among Gen Z — can result in rapidly accruing loan balances and damage to credit scores.


For those looking to invest, whether for retirement or more generally, the most important decision to make is their asset allocation: the distribution of their investments between bonds, which tend to be more stable, and equities, which are riskier but may pay bigger returns over time.

A traditional 60/40 split between stocks and bonds may serve investors tolerant of moderate risk, said Michelle Griffith, wealth adviser for US consumer wealth management at Citi. But every individual needs to determine their own risk tolerance by identifying their trigger points: how much of a loss they can tolerate before they feel the need to take action.

Investments should be spread across companies of varied sizes and sectors. Griffith’s younger clients tend to favor crypto and tech, she said, meaning they posted big losses this year while missing out on gains in sectors like energy.

Riskier assets, which also include meme stocks and options trading, are not necessarily red flags, said Kyle McBrien, a financial planner at Betterment — but they shouldn’t comprise more than 5% to 10% of an investment portfolio.

To contact the authors of this story:
Mackenzie Hawkins in New York at [email protected]
Paulina Cachero in New York at [email protected]

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