Soft saving and the Gen Z approach to retirement

Many young adults are approaching financial planning differently. Financial professionals should be ready.

Each generation has different financial priorities, whether it’s due to cultural shifts, economic realities of the moment, or trends reflecting the zeitgeist. That’s certainly proving to be true with Gen Z. The generation — comprised of those born between 1997 and 2012 — is not looking to retire early, or perhaps retire at all.

According to the Prosperity Index Report from Intuit, Gen Z is instead focused on “soft saving.” In other words, they’re more interested in cultivating their personal growth and well-being in the present rather than saving for the future. But don’t panic — as the oldest members of Gen Z enter their late 20s, it may be the time for financial professionals to familiarize themselves with soft saving and how many members of Gen Z approaches (or doesn’t approach) retirement.

What is soft saving?

It’s a relatively new term, so what does soft saving actually mean? Put simply, it’s the practice of using more money for the present, rather than putting it away for the future — in line with how Gen Z prioritizes maximizing their experiences. "...interested in cultivating their personal growth and well-being in the present rather than saving for the future."The findings from the Prosperity Index Report shed light on why soft saving has become so prominent. Specifically, the report found that 73% of Gen Z said they would rather have a better quality of life now than money in the bank, and 66% said they view money as a way to support their interests.

The report states that while Gen Z has an interest in saving and investing, their approach is “much softer.”

Recent findings seem to back up this apparent paradox. For instance, research from Bankrate found that 33% say they want to know more about investing to build wealth. Put simply — they want to grow their wealth, but where they may differ from previous generations is how and what they’re growing it for.

Shifting attitude toward retirement

It’s not just soft saving. The Intuit report also revealed some insight into the way Gen Z feels about the economy and their plans for the future. Perhaps most striking, the survey found that 66% of Gen Z respondents said they weren’t sure they’d have enough money to retire — about 58% of the general population said the same.

This change in mindset may highlight the fact that Gen Z is shifting the way younger adults seek financial advice. According to statistics from WallStreetZen, 76% percent of Gen Zers learns about personal finance via social media platforms — primarily from TikTok and YouTube. Reddit and Instagram are also popular destinations.

Meet them where they are

While Gen Z’s penchant for soft saving and social media may seem to run counter to conventional wisdom, it’s important for financial professionals working with younger clients to adjust their approach accordingly. Lean into their strengths and figure out the best solution for their financial future.

“The best approach when working with them is to use their strengths to help them improve their weaknesses,” says Melanie Musson, a financial expert at Clearsurance. “They’re good at using digital platforms for savings management, "...66% of Gen Z respondents said they weren’t sure they’d have enough money to retire ..."so introduce retirement savings options on digital formats that they can manage.”

This is a sentiment echoed by Brandon Galici, founder of Galici Financial. He says that a key strategy is helping Gen Z find a “deeper yes” — a reason for them to save that goes beyond accumulating more money.

“While each person is unique, you want to align your spending with your values. Having a “deeper yes” can help you prioritize saving,” he says. “For example, if you feel like you’re struggling with money and living paycheck to paycheck, saving money to an emergency fund can directly benefit your mental health by reducing your financial stress.”

While it’s important to lean into the strengths and goals of Gen Z, that doesn’t mean financial professionals should ignore the importance of helping them lay the groundwork for retirement — even if they can’t see it yet. Prioritizing the present and planning for the future are not mutually exclusive.

“We can show them how 'soft saving' can fit into their bigger picture,” says Richard Ford, co-founder of co-founder of Hart Accounting Services. “Smart budgeting and responsible spending can still build a financial cushion for future dreams, even if they're not retirement-specific.”

Ford also emphasizes the fact that Gen Z has one big advantage: they’re young.

“One thing Gen Z has in their favor as savers is time,” he says. “Compound interest works wonders over decades, so even small amounts invested early can grow significantly.”