Generation Z’s favorite investment may be a cause for concern. Here’s why.

Generation Z is getting smarter about their money, with some starting to invest even before they turn 18, according to a new report.

The survey by FINRA Investor Education Foundation and the CFA Institute, which defines Generation Z as those aged between 18 to 25, concluded that 6 in 10 owned at least some investments. Some 41% said they were investing in individual stocks, and 35% in mutual funds. 

However, crypto was their most popular investment. In fact, 55% are primarily invested in cryptocurrency like Bitcoin
BTCUSD,
+1.97%,
while 20% are exclusively invested in cryptocurrency and/or non-fungible tokens, or NFTs.

Others have sounded warnings about being heavily invested in crypto. Though Gen Z likes investing in crypto, investors should be cautious when putting money into the asset, the government said earlier this year.

The main motivator for Generation Z investors was to have enough money for traveling. Saving for unexpected expenses and retirement came in second and third place. respectively.

In March, the United States Securities and Exchange Commission’s Investor Education and Advocacy office said that investments in crypto asset securities can be “exceptionally volatile and speculative,” and that that the platforms where investors trade crypto may lack proper protections for investors. 

The FINRA/CFA Institute report cited multiple reasons why young people are getting into investing, from the ability to learn about investing through social media and other online platforms, the existence of apps that let them invest small amounts such as through fractional shares, as well as the underlying fear of missing out on a key way to make money.

“Gen Z investors are a growing force of digitally savvy stakeholders who are making their entrance into the financial markets,” the report stated.

The main motivator for Gen Z investors was to have enough money for traveling, with 62% citing it as their top financial goal. Saving for unexpected expenses and for retirement came in second and third place, respectively.

The report was based on a survey of 2,872 investors and non-investors who were aged 18 to 25, as well as millennial and Generation X investors in the U.S., Canada, U.K., and China.

When first starting out, Gen Z generally tried their hand at crypto with 44% saying so in the report. About a third also said they started investing in individual stocks, and 21% said in mutual funds. The median amount they first began investing with was $1,000.

The typical Gen Z invests a median of $4,000. Gen Z women were investing less than men — $3,000 versus $5,000  — and people of color invest even less ($2,000) than white investors ($5,000).

The typical Gen Z invests a median of $4,000. Gen Z women invest less than men — $3,000 versus $5,000  — and people of color in this demographic invest even less ($2,000) than white investors ($5,000).

Investing also started very early for some: A quarter of Gen Z investors said they began investing before they turned 18. “Starting to invest at a young age is common not only in the U.S., but also in Canada (24%) and the U.K. (22%),” the report said. 

A separate report by Fidelity Investment also found that Gen Z is making impressive gains in their retirement savings. But what drives them to take the initial first step is the ability to invest small, as well as their own curiosity, it added.

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