HomeBusinessOne third of Gen Z prefer crypto investments over pensions

One third of Gen Z prefer crypto investments over pensions

A third of 18 to 24-year-olds would invest in crypto rather than save in a pension – but some experts warn they are ‘gambling’ with their futures. 

Among young men the figure putting crypto over a pension climbs to almost half, while for women it is just over a quarter, according to the survey by money management app W1TTY. 

Commenting on the finding, Tom Selby, head of retirement policy at AJ Bell said: ‘It is concerning that so many young people – and particularly young men – say they would prefer to invest in cryptocurrencies than a pension.’ 

But while the poll showed younger investors backing volatile crypto over the get rich slow tactics of investing in a pension, investment platform eToro says its older customers are more likely to hold cryptoassets.  

‘Gambling’ with their futures? Personal finance experts say that investing everything into just a single asset, such as cryptocurrency, can be a big risk

The W1TTY report surveyed 2,000 members of Gen Z in the UK on their financial habits and attitudes towards savings and investments. 

A further 30 per cent of 18-24-year-olds – the age group known as Generation Z – said they were not sure if they would rather invest in cryptocurrency than a pension. 

Experts said that relying on a single asset such as cryptocurrency to fund later life was concerning.  

Selby said: ‘This may be driven by the perception that investing in crypto is an easy way to make money quickly.

‘In reality, as we have seen recently, cryptocurrencies can be extremely volatile and have yet to demonstrate their utility.

‘Those hanging their retirement aspirations on the performance of a single asset like crypto aren’t really investing at all – they are gambling.

 ‘Of course, it is possible that a cryptocurrency will go “to the moon” and make those who invest rich. It is also possible its value will drop substantially – or even to zero.’

However, while the poll indicated skewed interest in crypto over pensions among the young, investor data from eToro  indicates that holding cryptoassets is more popular among its older customers.

The age group using its platform most likely to hold some cryptoassets is those aged 70-plus, at 63 per cent. Meanwhile, 60 per cent of accounts of those aged 50 to 59 held crypto and 62 per cent of those aged 60 to 69.

That compared to 51 per cent of 18 to 24-year-olds on the platform and 52 per cent of 25 to 29-year-olds.

EToro said that 60 per cent of investors over 50’s first actions on opening an account was to invest in cryptoassets, compared to 52 per cent of 18 to 24-year-olds. These younger investors are more likely to buy shares first, at 37 per cent compared to 29 per cent of over-50s.  

The eToro data reflects that many older investors opening accounts with the platform may already have established DIY investing accounts elsewhere but they are unable to buy and hold cryptoassets with them. 

Source eToro February 2022 (Percentages may not add up to100% due to other assets)

Quarter of 18 to 24s use social media for finance advice 

Social media has become the go-to destination for almost a quarter of generation Z when seeking financial advice, according to the study.

Instagram and TikTok’s ‘finfluencers’, who provide advice on saving and making money, continue to take the platforms by storm. 

In 2021 alone, there were 4.4billion views of on TikTok with the hashtag #personalfinance.

A third of young people searched on Google to access financial advice, while one in 10 said they did not seek any financial support whatsoever.

Get rich fast? 'Finfluencers' on sites such as Instagram and TikTok may also be encouraging young investors to look for investments that might offer quick gains

Get rich fast? ‘Finfluencers’ on sites such as Instagram and TikTok may also be encouraging young investors to look for investments that might offer quick gains

Andrew Hagger, founder and director of Moneycomms said: ‘A lot of crypto hype comes from questionable sources on social media. 

‘It’s sometimes hard to pick out what is genuine, research-based opinion and what is blatant rubbish.

‘Crypto is an area where many people have claimed to have made large profits in recent years and for many people this drives the FOMO effect, or the fear of missing out.

‘The reality is, a lot of people will have also lost money on crypto investments but they are not so keen to shout about that.’

What young investors need to consider 

Comparing crypto and pensions is a bit like comparing a hare and a tortoise. 

One involves saving carefully over many years in order to realise gains much later in life, while the other offers the opportunity to take a risk and possibly ‘get rich quick’. 

The benefits of a pension often seem so far away in the future that it is no surprise it may be of little interest to young people in their twenties.

However, experts say they should consider the tax benefits that come from savings or investing products like pensions, Isas and Lifetime Isas.

AJ Bell’s Selby adds: ‘For starters, you don’t really invest in the pension at all – rather, the pension is your gateway to investing in stocks, bonds and funds around the world. This allows you to build a diversified portfolio of investments that can grow over time.

‘What’s more, money invested through your pension benefits from upfront tax relief – effectively a 25 per cent bonus for basic-rate taxpayers.

‘Higher and additional-rate taxpayers can also claim extra tax relief from HMRC.

‘All investment gains and dividends received within a pension are then tax free, whereas gains made on crypto currencies are likely to be subject to capital gains tax.’

Popular: More than 2million people in the UK now own cryptocurrency, according to the FCA

Popular: More than 2million people in the UK now own cryptocurrency, according to the FCA 

Whether you believe crypto is a bubble waiting to burst, a dependable digital gold or destined to replace fiat currency altogether, there is no denying it now has an enormous following behind it.

The number of people who hold cryptocurrencies in the UK is estimated to be 2.3 million, according to recent research by the Financial Conduct Authority.

For those weighing up whether to invest in crypto, it is essential they educate themselves so that they can at least make an informed decision.

‘If you truly believe a cryptocurrency is going to substantially increase in value over the long-term and you understand the risks associated with putting all your eggs in one basket, then that’s fine,’ says Selby.

‘However, don’t blindly gamble your future on something you don’t understand that could just as easily plummet in value.

‘Make sure you understand the benefits of diversification and consider how you would feel if the value of your investments fell substantially. 

‘If you don’t feel comfortable with this kind of volatility, you might need to consider changing your approach.’

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