June 21, 2024

Gen Z and ‘Soft Saving’: How I Balance My Financial and Mental Health 

Financial experts always recommend finding a balance between living in the present and preparing for the future. Cover your bills, pay down your debt, build an emergency fund and save for retirement. It’s sound advice, and I’ve suggested it numerous times myself. 

But for many of us, there’s not enough money left over to comfortably save, and racing to catch up is stressful. That’s a lot of what’s behind Generation Z’s “soft saving” motto, which emphasizes personal growth and mental health instead of agonizing over financial security or status down the road.  

“The choice between prioritizing quality of life over long-term financial health is really a personal one, and it all depends on the individual’s values and circumstances,” said Bola Sokunbi, founder of Clever Girl Finance and CNET expert review board member

“Soft saving” is a form of “soft living,” a lifestyle that focuses on being fulfilled, setting boundaries and ditching traditional hustle culture. (Work to live, not live to work, amirite?) 

As someone who monitors personal finance trends, I think a lot of Gen Zers like myself do soft saving by accident, or maybe by default. It’s not that we don’t care about retirement or that we’re not interested in having financial literacy. We just have a different — say, realistic — approach to saving money. 

Read more: 5 Ways I’m Thinking Differently About Saving Money  

What is ‘soft saving’?

Soft saving focuses on embracing the present with less weight on budgeting and less stress on investing. It rejects what previous generations have been chasing in the rise-and-grind, make-it-or-break-it cycle. In many ways, that attitude was epitomized by the FIRE movement, which stands for “financial independence, retire early.” 

“The choice between prioritizing quality of life over long-term financial health is really a personal one, and it all depends on the individual’s values and circumstances.”

Bola Sokunbi
Expert Reviewer

Intuit’s most recent Prosperity Index Study explains how Gen Z is leading the wave with this “softer” approach to life and finances. According to the study, 3 out of 4 Gen Zers say they’d rather have a better quality of life than extra money in the bank. 

That means instead of pushing harder to get a promotion, find extra gig work or cut out all discretionary expenses, it’s more important to achieve a work-life balance, pursue hobbies and enjoy things like travel. 

Read more: How Much Should You Save Each Month?

Why are Gen Zers ‘soft saving’?

Gen Zers who are just starting their financial journeys have been affected by a turbulent economic environment: a global pandemic, record-high inflation, mediocre wages, soaring interest rates and the return of student loan payments

According to Consumer Affairs, Gen Zers have 86% less purchasing power than Baby Boomers did in their 20s. We pay proportionately far more for essentials like food, housing and gas, and we have much more debt. The average Gen Z borrower has an outstanding student loan balance of $24,473, according to Bankrate. (Case in point: My current student loan balance is $27,216.) 

But that economic uncertainty doesn’t just affect how we spend, save and invest right now. It also affects how we view the future. Nearly three-quarters of Gen Zers from the Intuit study say the economy makes them hesitant to set up long-term financial goals, and two-thirds of Gen Zers aren’t sure they’ll ever have enough money to retire. 

In my own case, the notion of building wealth through homeownership feels so out of reach, due to rising home prices and high mortgage rates, that I’ve accepted I probably won’t ever own a home. Instead, I’m focusing on paying down my student loan debt in the here and now. 

So, should we be manically saving for a future that’s not guaranteed? Sokunbi suggests it’s all about striking a balance between short-term happiness and long-term financial security. 

“The future is not predictable, but we are living longer on average than past generations, and we need to be able to take care of our future selves,” said Sokunbi. “It’s very possible to have a ‘soft savings’ approach and still put something aside for the future.”

Read more: 6 Places to Save Money and Earn Interest 

Is ‘soft saving’ a bad financial move?

Gen Z has different ideas of what it means to prosper, and “soft living” is part of that. But you don’t have to sacrifice your quality of life to improve your prospects for financial stability, according to Bernadette Joy, a personal finance coach and CNET expert review board member

“Investing in personal growth and mental well-being are important investments to make so that you can invest actual dollars in the future,” said Joy. “But at some point, the hope would be (even if it takes years) that the investment in mental well-being will allow the person to focus on investing for the future.”

The key is to set realistic goals and save what you can when you can. In the meantime, you can improve your money IQ, learn about different budgeting methods or take on low-stakes savings challenges

“Investing in personal growth and mental well-being are important investments to make so that you can invest actual dollars in the future.”

Bernadette Joy
Expert Reviewer

For example, I prioritize my bills and needs before I set aside money in my high-yield savings account that I opened earlier this month. Even having a little cash in an account with a higher interest rate means I’m already seeing bigger returns on my savings than I would with a standard checking account. I also contribute to my 401(k) to maximize my employer’s match. When the end of the month rolls around, I typically don’t have a significant amount of change lying around to set aside for my future. And that’s OK.

Gen Zers don’t want to live paycheck to paycheck, but when dealing with macroeconomic barriers, it feels healthier to focus on what’s in our control. I’m concentrating more on building an emergency fund than a nest egg for a retirement that’s 40-something years away.

Bottom line: You can take a “soft saving” approach by emphasizing your present needs, but you don’t have to sacrifice your long-term financial goals entirely. 

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