"Financial Choices Among Gen Z:" Analyzing the Trade-off Between Immediate Joy and Future Prosperity
Modern Savings Trends: Say goodbye to the extreme penny-pinching of the FIRE movement as a new financial philosophy, known as "soft saving," gains popularity among young Americans. Instead of focusing solely on tomorrow's savings, this generation is placing their mental health and present well-being at the forefront.
Over 4 in 10 young adults report financial insecurity, while only 16% feel they are thriving financially, according to a 2025 survey by the Harvard Public Opinion Project[1]. Despite a strong majority (86%) valuing financial stability, only about half (56%) express confidence in achieving it.
John Della Volpe, director of polling at the Harvard Kennedy School Institute of Politics, stated in a press release that, "Gen Z has faced pandemic isolation during formative years, entered an unstable economy, and faced skyrocketing housing and education costs-all while being told they're not resilient enough." He added, "What they need isn't another lecture but genuine recognition of their struggles."
What is Soft Saving?
The essence of soft saving lies in embracing present enjoyment over aggressive saving for the future. Rather than obsessing over every penny and retiring early as advocated by the FIRE movement, soft savers prioritize their emotional and financial satisfaction now, saving what's left after meeting their current needs.
The increased appeal of this approach is rooted in economic realities, such as escalating housing costs and mounting student loan debt that consume large portions of young adults' paychecks, as well as a growing sense of uncertainty regarding future retirement[2].
Three-quarters (73%) of Gen Z respondents in an Intuit survey declared a preference for a better quality of life over extra funds in the bank, while the same percentage felt hesitant to establish long-term goals under current economic conditions[2]. Moreover, 66% of Gen Z are unsure if they'll ever have enough resources for retirement[3].
These factors contribute to the rise of soft saving, as many young adults reassess financial success to align with their reality. However, it is essential to remember that soft saving does not equate to financial recklessness. In fact, 84% of Gen Zers set aside a portion of their income monthly and 57% adhere to a budget[3].
However, rising expenses, particularly housing, weigh heavily on Gen Z's budget, as it accounts for over half of their monthly spending on average. Consequently, only 20% of Gen Zers are currently saving towards retirement[3]. This is concerning because the sooner you start saving, the greater the potential your money has to grow through compounding[4].
Advantages of Soft Saving:
- Improved Mental Health: Investing in immediate well-being addresses pressing mental health concerns and deferred happiness[5].
- Flexibility: Soft saving creates breathing room for career exploration, skill development, and personal growth, without the pressure of meeting arbitrary milestones[5].
Drawbacks of Soft Saving:
- Retirement Gap: Emphasizing the present can come at a cost of future security, as inadequate early contributions could mean foregoing decades of savings and compounding[4]. Financial advisor Nate Hoskin advises Gen Z to view savings as a means to maintain financial control amidst daily chaos.
- Lack of Emergency Fund: While mental well-being is crucial, it's equally important to be financially prepared. An emergency fund equal to at least three months' income is recommended to cover unexpected expenses[7].
- Lifestyle Creep: Developing a spending-first mindset can be hard to break, making it more challenging to re-establish a savings mentality down the line. Financial planner Mark McGrath warns that this may eventually result in a substantial retirement fund shortage.
Conclusion:
Soft saving is all about enjoying life today, rather than saving aggressively for tomorrow. The trend among Generation Z reflects their response to economic uncertainty that has made long-term planning seem challenging, making retirement seem out of reach for many.
However, by striking a balance between intentional present-day spending, thoughtful debt management, and modest, consistent investing, young adults can cultivate their immediate happiness while also building a foundation for future security[6].
Sources:
- Harvard Public Opinion Project (n.d.) 2025 Survey. Retrieved from https://caphs.harvard.edu/harvard_public_opinion_project
- Intuit (2023) Survey of Financial Priorities. Retrieved from https://intuit.com/articles/2023/01/intuit-financial-spr
- TIAA (2024) Life Chances for Gen Z. Retrieved from https://www.tiaa.org/public-policy/life-chances-gen-z
- Federal Reserve Bank of St. Louis (n.d.) Personal Saving Rate: 1959 to 2025. Retrieved from https://fred.stlouisfed.org/series/PSAVERT
- CNBC (2020) Generation Z's struggles with financial wellness. Retrieved from https://www.cnbc.com/2020/08/06/generation-z-faces-financial-anxiety-as-pandemic-reveals-economic-divide.html
- Hoskin Capital (n.d.) Retirement Planning for the Next Generation - Gen Z. Retrieved from https://www.hoskincapital.com/blog/retirement-planning-for-the-next-generation-gen-z
- Bankrate (2021) Emergency Fund Calculator. Retrieved from https://www.bankrate.com/calculators/savings/emergency-fund-calculator.aspx
- Gen Z's soft saving approach, prioritizing present enjoyment and mental health, contrasts with the FIRE movement's focus on excessive saving and early retirement, aligning more with the current trend of valuing health-and-wellness and mental health.
- In an Intuit survey, 73% of Gen Z respondents preferred a better quality of life over extra funds in the bank, while only 57% adhered to a budget, indicating that despite their financial insecurity, they prioritize personal-finance satisfaction over aggressive savings.
- ThePreferences for Health-and-Wellness, Mental Health, and Finance: Soft Saving in Gen Z, the lack of emphasis on retirement savings through soft saving, could pose a potential threat to future financial security, as only 20% of Gen Zers are currently saving towards retirement, accentuating the importance of careful long-term financial planning.
