Millennials and Gen Z: spot the difference
Millennials and Gen Z are often spoken of as one, although they are two distinct demographic cohorts. We look into what's the difference between Millennials and Gen Z and why this will matter for investors and entrepreneurs.
Millennials and Gen Z are often mentioned in the same breath. We know quite a lot about Millennials, also called Generation Y.
But what do we know about the next in line, Generation Z? Understanding these young consumers will help you understand how this cohort is poised to shape the global economy and the investment landscape in years to come.
There are different ways to define these demographic groupings, but Millennials are commonly considered those born in the early 1980s to early 2000s, while Gen Z are those born from 2000 onwards.
Millennials are not a homogenous mass as the grouping spans different life stages, and of course you can't stereotype millions of people. Nevertheless, there are a few general trends we can identify from this slightly older demographic.
Emerging market Millennials look for convenience
What do Millennials want? Credit Suisse's research in emerging markets reveals convenience is hugely important to them, and this is reflected in their spending patterns.
They are more likely to spend on lifestyle products such as eating out, food delivery, gaming and music streaming services than big-ticket discretionary items like cars.
They also prioritize their health, spending more on gym and sports team memberships and less on smoking and drinking.
Smartphones are hugely important to Gen Y – Credit Suisse's report found that one in five 18-29-year olds spend more than four hours a day on their mobiles, double the time spent by those aged 46-65.
Many of these trends are also being seen among Millennials in developed markets too, with a focus on experiences over products, travel and leisure, and much lower brand loyalty than we see among older generations.
Generation Z: a third of the global population
But who are Generation Z and how do they compare to their forerunners?
Gen Z will make up almost a third of the global population this year. They are more optimistic and slightly happier than the generation in front of them.
Buyers of delivery services, gadgets and participants in the gig economy, they like good food, health and leisure. They embrace diversity and inclusion, and see identity as less fixed than other generations might, for example, in terms of religion and gender.
Millennials and Gen Z are investing for impact
From an investment perspective, both Millennials and Gen Z care about where their money goes. A recent poll found that 80% of Millennial investors either own or show an interest in impact investments.
Impact investing is, as the name suggests, a way of investing to have a measurable positive result on society or the environment while generating a financial return. This type of socially responsible investing tends to be long-term in nature and allows investors to put their money to work in line with their values.
There are some differences between Millennials and Gen Z as investors, though. The rise of impact investing has happened just as Millennials are maturing as investors and topics like climate change have become an urgent priority for them.
Meanwhile, Generation Z-ers are just starting their investment journey. Growing up in an economic downturn has made them financially cautious. They want to save and avoid debt, and are already starting to invest and think about retirement.
Millennials and Gen Z appear to want to invest according to their principles. This is likely to be even more emphatic among the younger cohort.
Research indicates Gen Z is activist in supporting causes and cares deeply about the environment, sustainability, clean energy, and social enterprise. This suggests they will also be willing to consider their impact while investing, making the world a better place in the process.
Trusting tech brands
Millennials and Gen Z also have slightly different perspectives on technology. While Gen Y-ers can remember a time before the internet existed, Gen Z are the true digital natives who grew up with tablets, smartphones and apps.
They are used to watching videos on content sharing platforms to learn how to do things, and this has given them a 'DIY mentality', according to research from Mintel. Combined with their values, this could translate into changes in how this generation approaches investing and personal finances.
Despite their differences, Millennials and Gen Z together will be a powerful cohort. With around $41 trillion waiting to transfer to the next generation over the next three decades, their values and consumer preferences will be disruptive in all sorts of ways. Investors and entrepreneurs would do well to watch out.