Helping Gen Z generate a feel for finance

Susan Hope

Parents are being encouraged to speak to their children about money, and the importance of saving and investing from a young age, to help the younger generation achieve a comfortable level of financial security.

Meanwhile, many financial services companies are trying to simplify the often complex world of investing for the “Gen Z” demographic. Generation Z generally refers to people born between 1997 and 2012.

In a bid to reach out to younger investors, one of the offerings from Lloyds Banking Group is Invest Wise for 18 to 25-year-olds.

Invest Wise accounts are available through Lloyds, Bank of Scotland, and the Halifax. They come with no admin fee (under the age of 26), offer free regular investing through its scheduled investment service, provide smart tools to help young people invest, and have a dedicated app.

As an illustration, Lloyds says if someone starts investing £20 per month at 18 and finishes at 28 with they could have built up £3,460. An investment of £100 per month could reach £17,302 over that ten-year period.

If someone invested £20 per month from the ages of 18 to 40 with Invest Wise, they could reach £12,378, and if they put in £100 per month over those 22 years they could achieve £61,892.

These examples are based on the historical return of the FTSE-100 index. The average annual return rate of 6.89 per cent is the ten-year average between 2012 to 2022.

Lloyds says it has seen a 152 per cent increase in young people opening investing accounts with the lender last year over the previous year, before Invest Wise launched. More than twice as many 18 to 25s overall opened investment accounts with Lloyds in 2024 than in 2023.

Manuel Pardavila-Gonzalez, investments managing director at Lloyds Banking Group, says: “We’re seeing more Gen Z savers investing regularly with us since we made it simpler and more affordable to take their first step. Invest Wise gives them the opportunity to start small and grow over time.

“Helping young adults build stronger financial foundations can stem from everyday conversations at home – these chats can help shape positive savings habits from an early stage and develop greater confidence and resilience that can last a lifetime.”

Lloyds has also offered Ready-Made Investments (RMIs) since 2023. Since their launch RMIs have attracted nearly 60,000 customers, with over £700 million invested to date.

Lloyds says RMIs are designed to make investing more accessible and less intimidating for first-time investors. Offering a range of diversified investment options, RMIs cater to different risk appetites. They allow customers to ​tailor their exposure to risk based on individual financial goals and needs.​

Case study: Susan Hope and her aspirations for Alexa

Susan Hope has built up her career in financial services to become business development director at Scottish Widows, part of Lloyds Banking Group. She has always encouraged her daughter Alexa – a student in musical theatre and dance at Essex University, about to enter her second year of three – to make sound financial plans for her future.

Susan’s early experience made her determined to educate her daughter on financial matters. Susan started a course at the University of Aberdeen, but left after a few months feeling she couldn’t afford it and got a job instead.

She believes it’s particularly important to get women of all ages to save and invest.

“My day job is to encourage more people to save more for their retirement,” says Susan. “But my passion is around closing the gender pension gap.”

She points to figures showing that women are still projected to have a retirement income that is 30 per cent lower than men’s, and two in five (42 per cent) of women face poverty in retirement, compared to 35 per cent of men.

Susan explains that a relatively small behaviour change early in a woman’s career can make a difference to retirement income.

For example, she says an extra 1.15 per cent invested from the age of 22, pushing contributions from 8 per cent to 9.15 per cent, would wipe out the deficit caused by taking a career break in their 30s.

“Simple calculations like this show women the power of the possible. Education can do as much as policy reform to support in closing the gender pensions gap,” she adds.

Daughter Alexa, 19, says: “Since I got my first bank account, when I was in my first year at high school, my mum has explained to me how I can keep money aside and start earning interest on it. And, when we were on holiday this year, we were talking about ways that I can start investing.

“My mum had also set up a Junior ISA for me that I could access when I turned 18, and I’ve put just over half of that into savings that I’m not going to touch until I graduate.”

Having listened to her mum’s guidance over the years, Alexa says she has three pots of money – for needs, wants, and savings for after graduation. She works out how much she needs for things like dance shoes for her course, food and for travelling to London, and how much she has left to spend on “fun things”.

“I know that musical theatre is not always going to provide a steady income, so I definitely want to have savings, especially for that first year after I graduate, and mum has invested some for me,” says Alexa.

Susan explains: “We focused early on everyday savings and bank accounts. On holiday, we talked about the difference between saving very steadily and investing for growth for the long-term.

“We started super-small and had some conversations about the risks that come with investing and such things as the impact of global markets. It’s been a really nice, organic conversation.”

To ensure their approach to investment is straightforward Alexa and Susan chose to go with a Lloyds Banking Group investment product especially tailored for young people.

Susan explains: “Alexa leaves this to me, as it’s her first foray into investment. If she does have lumpy periods at work in the future, then she will have a small cushion.”

She adds: “I’ve always believed the only thing we can really control when we’re investing is the cost. We can keep the costs down to a minimum, and let the investments take their course for the long term.”

Alexa says that many of her Gen Z peers are focused on necessities such as having to pay rent and for their food. Many of them look for ways to make more money, such as doing nail courses so they can make some income – very much a gig economy approach.

Alexa’s friends ask her about money and she tries to make them aware of what’s out there. She adds that they can always talk to her mum if they want more in-depth guidance and information.

Susan says: “I’m a massive fan of the kitchen table conversations we can have.”

She adds: “I know from my job how hard Scottish Widows is working to engage with young people, so other providers must be doing the same. We’re a 200-year-old company. We’re on TikTok, Instagram, Facebook, we’re everywhere, and we’re working with Gen Z influencers. We’re trying to be where people are on their daily news feeds.

“Alexa always tells me to keep what I’m saying relatable. I’m a fan of financial education, but I’m also a real fan of bite sized chunks of information.”

In terms of advice for other parents and young people when dealing with topics around finance, Susan says: “Have the conversation as early as possible, and in a really honest way. Alexa and I talk about things like how much I earn and how much tax and National Insurance I pay. It’s like building blocks – we talked about rainy-day money before we had a conversation about investing. Have a ten or 15-minute conversation at a time, ask some questions and move on. I understand it can be quite daunting, but never before have we had so much brilliant information available.”

On her guidance for others, Alexa explains: “Budgeting is really important, but I wouldn’t stress if you get your budget wrong at first. Save while also keeping money to have fun – we’re young, we should be going out with friends.”