From the lack of affordable housing to the cost of higher education, members of the Millennial and Gen Z generations face a variety of obstacles to building personal wealth.
A recent report shows that many of them are trying to achieve their financial goals. Insurance marketplace Policygenius surveyed nearly 4,000 U.S. adults in October, finding that millennials and Gen Z are employing creative strategies, some popularized by social media, in an effort to gain a financial foothold.
6 Widely Attempted Financial “Hacks”
Policygenius asked respondents if they had tried any of the six personal finance “hacks” listed in the survey: day trading, infinite banking, maximizing credit card rewards, “cash stuffing” (envelope budgeting), no-spend challenge and extreme couponing.
More than 60% of millennials (ages 27 to 42) and Generation Z (ages 18 to 26) surveyed by Policygenius said they had tried at least one. For context, that’s a much larger share than the 20% who say they own real estate, traditionally seen as the primary way to build wealth.
By comparison, only 36% of Generation Xers (ages 43 to 58) and Baby Boomers (ages 59 to 77) said they had used a hack.
Millennials are the most likely to say they have maximized credit card rewards – defined by Policygenius as a mix of using credit cards to accumulate rewards points – with a quarter saying they have used this hack.
The most popular hack among Gen Zers was the no-spend challenge, a viral social media hack that involves spending as little as possible for a set period of time.
Overall, 25% of young adults said they have tried “endless banking” or borrowing against a whole life insurance policy. With this strategy, policyholders overfinance their policy so they can use it as a line of credit and essentially act as their own lender.
About 32% of young adults also said they had dabbled in day trading, which involves buying and selling securities such as stocks on the same day in hopes of making quick profits.
Smaller shares of millennials and Generation Z said they had tried cash stuffing, a trendy budgeting strategy that involves placing cash in envelopes intended for a person’s expenses, and extreme couponing.
Should You Try a Personal Finance Hack?
These hacks can be a fun way for young people to experiment with their finances and sometimes lead to short-term gains or established savings budgets. But some strategies can do more harm than good, like day trading.
This can be risky because you can’t predict the market, so your chances of losing a lot of money quickly are high. Additionally, if you day trade with borrowed money and lose it, or don’t make the profit you expect, you could go into debt and face even greater financial consequences.
While many young adults seem to have learned a few tricks from social media, keep in mind that the internet isn’t always reliable. Always be cautious of advice that promises to help you get rich quick, and remember that there is no substitute for basic skills, like budgeting, when it comes to building a solid financial foundation.
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