Gen Alpha may need a financial reality check

Let’s be clear: We shouldn’t expect kids to be experts in financial literacy. As much as they love YouTube, I doubt many spend their time watching videos of Warren Buffett.

However, the oldest members of this Gen Alpha group will become adult consumers soon enough, and between the way they approach money and their perception of spending, two things are quite clear. The first is that regardless of their industry, companies will be put to the test by this generation. The second is that Gen Alpha may have a rude awakening when faced with the harsh realities of life.

We’ve done several studies on Gen Alpha, with the most recent focusing on their thoughts and interactions within five key industries: beauty, automotive, financial services, food, and luxury. And while we uncovered many great insights, I can’t help but focus on the spending. Seventy percent of respondents say they have a basic understanding of money, and again, at their age, we shouldn’t necessarily assume that to be the case. However, other findings paint a picture of a generation that has a taste for the finer things in life, high expectations, and increasing influence.

Luxury possessions are of value to Alphas

Typical toys and video games aren’t the only things catching the attention of Gen Alpha; they have big dreams about the life they’ll one day lead. Thirty-five percent aspire to own a luxury car when they are older, and who could blame them? But did you know that 68% already own a luxury product by the time they turn 10 years old? While they place plenty of value on digital goods and their digital identities, 66% say they would pay a premium for real-life products.

Alphas believe they are entitled to what they want, when and how they want it

How will they pay for these luxury high-end items? Early signs indicate it won’t be through traditional institutions but through e-wallets and online banks. Alphas’ top five favorite financial brands are PayPal, CashApp, Visa, Apple Pay, and Venmo. Companies that don’t offer these digital payment options may miss out on purchases. Additionally, others that don’t provide flexibility on the products themselves could face similar pushback because Alphas want to customize. In fact, 58% of respondents would rather customize a car than save money by purchasing a standard model. I’m sure you’re noticing the theme of a lack of frugality, which aligns with an eye-opening mindset: 75% of Alphas say they deserve to get most of the things they want.

Parents are giving Alphas a meaningful decision-making voice

Perhaps this financial ambition and confidence stems from the parents, who say their children play a central role in many decisions within their households. For example, 61% believe their kids have final say on which car the family purchases, and the same percentage believe their kids have influence over what the family eats. While they have a voice in the choice, we must also acknowledge that they likely aren’t feeling the impacts of those decisions because they aren’t yet financially responsible for the purchases.

Kids dream big, and that’s a good thing. That inspiration and imagination should never be discouraged, and there are only so many real-world considerations they can apply when they’ve had minimal experience.

That being said, companies that aren’t keeping Gen Alpha’s perspectives at the forefront of their strategies could find themselves drastically off the mark when these consumers reach purchasing age. At the same time, Alphas appear to be experiencing a false sense of reality on the accessibility and affordability of luxury or customized products. Both trends could impact the way this generation budgets and manages money, how it prioritizes desired purchases, and its brand loyalty.

Of course, they are still young, and these feelings could change quickly. But based on the data we have today, the companies that meet Alphas’ experiential needs in areas like flexible options and digital payments could have an advantage. And to the social media creators posting financial literacy content, I don’t think you’ll have a hard time getting engagement from Alphas once they start paying their own bills.

https://www.fastcompany.com/91321515/gen-alpha-may-need-a-financial-reality-check?partner=rss&utm_source=rss&utm_medium=feed&utm_campaign=rss+fastcompany&utm_content=rss