Like all generations, Gen Zs view the world through a particular set of lenses and their unique financial lens is no exception. Enter soft saving, a viral trend that challenges the way Gen Zs think about retirement, while empowering them to prioritise present experiences. Farzana Botha, Segment Marketing Manager at Sanlam Risk and Savings, sheds light on what this trend means for traditional retirement planning and how intermediaries can guide their younger clients through this new financial landscape.
Botha says, “Soft saving reflects a paradigm shift in financial priorities influenced by economic challenges and a desire for emotional connections and value-based investing. Prosperity data shows that 73% of Gen Z respondents say the current economy makes them hesitant to set up long-term goals, while 66% say they’re not sure they’ll even have enough money to be able to retire.
For intermediaries, this evolving landscape underscores the importance of blending traditional financial products with innovative strategies. By understanding the emotional and value-based investment drivers of younger clients, they can tailor advice that resonates with this generation’s unique aspirations.
Understanding the new financial trend
The Prosperity Index shows that although Gen Zs are interested in exploring and learning about saving and investing, their approach is much softer than in previous decades. While the soft saving trend offers a more personalised and flexible approach to financial planning, Botha says it is not risk-free. “A major concern is the potential for under-provision for future needs and potential conflicts between short-term desires and long-term financial health. Careful planning and professional advice are key.”
Commenting on the trend, Sanam Naran, counselling psychologist and founder of Conscious Psychology, says Gen Z is redefining their approach to careers and financial stability, shaped by a blend of realism and adaptability.
“Gen Z grew up in a landscape marked by economic upheaval – from witnessing their parents’ struggles during recessions and the COVID-19 pandemic, to experiencing them depleting their savings. This exposure has fostered a practical view of work as a means to an end, rather than the pursuit of a ‘dream job’. That’s why they pursue daily joy in hobbies and personal interests, understanding that fulfilment extends beyond professional achievements.”
While the ease and speed of social media and online shopping have ingrained a culture of instant gratification and influenced their spending habits, there is more to Gen Zs. “They are also mental health advocates, tradition breakers, and status quo challengers. They’re more globally connected and informed than any previous generation, and this is powerful.”
Naran says financial education is beneficial in shaping this generation’s spending habits and can be even more effective if intermediaries engage Gen Z in a manner that resonates with them, like empowering them to prioritise their mental health. “This generation focuses on more than just saving money; they save with a purpose, and helping them understand the broader impact of their financial decisions is one way of capturing their attention,” she adds.
The role of intermediaries
Botha says that traditional financial products are as relevant as ever, even when one considers the soft saving trend, but intermediaries must reimagine their use. She provides the following tips to help intermediaries effectively guide and support younger clients in their financial planning:
Understand the client’s perspective: Intermediaries should acknowledge that retirement is no longer a hard stop at a traditional age but a pivot for self-actualisation, and they should approach clients with an understanding of these new perspectives. “Since younger generations want to align savings with meaningful endeavours, intermediaries can engage in detailed discussions about young clients’ life goals, passions, and what they value most. This could include career aspirations and hobbies. Intermediaries can also leverage social media to understand the trends and issues that matter most to Gen Z, offering a window into their worldviews and financial perspectives.”
Educate on the balance of present and future: While acknowledging the preference for current experiences, intermediaries should educate clients on the importance of preparing for the future and the risks of not making provision for their future selves. They can help younger clients balance daily joy with preparing for tomorrow by advising them on setting up automated savings strategies, like direct debits or minimal premium policies.
Transition to a financial coach: Botha says this new financial planning landscape requires intermediaries to transition from traditional advisory roles to being more like financial coaches. They should focus on relational, conversation-based guidance, helping clients make self-directed decisions. “Intermediaries can also use tools like Sanlam’s Advice Partner to facilitate tailored scenario planning and help clients align their individual financial goals with outcomes that will help them live a life of confidence.” Encourage informed decision-making: Botha says intermediaries must also educate clients on how traditional products like annuities and tax-free savings can be used in innovative ways to meet their dynamic needs. She says intermediaries can use Sanlam’s financial planning tools and calculators for scenario planning, enabling clients to see the potential outcomes of different financial choices and empowering them to make informed decisions.
She adds, “An intermediary can use these tools to demonstrate to a young client how allocating a portion of their savings to a socially responsible investment fund aligns with their soft savings values while still contributing to their long-term financial goals. This scenario helps the client understand how they can make a long-term positive impact on their future financial stability through their investments, without compromising their immediate fulfilment.”
Botha concludes, “As the financial landscape evolves, so too must the approach of intermediaries. By employing these strategies, intermediaries can effectively guide younger clients through the soft saving trend, ensuring a balanced approach that respects their values and aspirations while securing their financial future. Sanlam’s commitment to continuous innovation and client-centric solutions positions our intermediaries to lead the way in this new era of financial planning.”
