What Everyone Can Learn from Gen Z's Soft Saving Trend
Trends, as a rule, don't last. So as you get older, you're forgiven if you don't want to engage with every new trend that pops up on social media. That's how I felt when I heard about the "soft saving" trend spreading in Gen Z circles and knowing about financial trends is basically my job.
But even if you're not Gen Z and have no interest in whatever soft saving is, I think there's something useful in understanding what it is and applying the lessons (if not the principles) from the trend.
What is soft saving?
Picture a rigid, well-defined personal savings plan:
- You set aside $ from every paycheck.
- You plan to save $$ before the end of the year
- To reach your goal, you're only allowed to spend $ each month on anything even remotely fun
- If you follow everything exactly as you drew it up you'll have the money you need for that car, vacation, retirement, etc., that you always dreamed of...
Soft saving is a much more flexible, moment-to-moment approach to saving. The goals are looser. Rather than saving a fixed amount each paycheck, you save what you comfortably can. Rather than suffering today for that big payoff tomorrow, you make sure to enjoy today while keeping an eye on those big picture goals.
A 2023 survey from Intuit found that 73% of Gen Z are hesitant to set long-term goals because of the uncertainty of the economy. Similarly, 73% of Gen Z would rather have a higher quality of life today than extra money in the bank.
The soft saving trend is a reflection of both of those feelings. For many young people, the future does not feel guaranteed, but for Gen Z that feeling may be even more acute as costs continue to rise and income and job opportunities stay stagnant. Gen Z is by no means throwing in the towel, but it's understandable why they may want to make sure they have fun, meaningful experiences today rather than working for a tomorrow they may not get to enjoy.
How does soft saving work?
The interesting (and revealing) thing about soft saving is that functionally it's not all that different from how we've always talked about building savings:
- Set your goals. Yes, your goals will be less rigid and precise, but you're still working toward something tangible. That might be a dollar amount or a concrete goal (taking a trip to Italy). Your timeline will probably be vague, which will allow you to adjust to real world circumstances as they come up, but you will be working toward something.
- Find the money. Where will the money come from? Will you find ways to earn more, spend less, or a combination of the two? What's most important to you right now? Where are the least painful places to slow your spending?
- Track your progress. Your timeline may be slippery. Progress may be faster some months and nonexistent other months. Staying accountable doesn't mean getting down on yourself when you don't reach a goal. It just means knowing what happened and why it happened and ensuring that those are both in line with your priorities.
- Celebrate your wins. Small, achievable goals make it easier to build momentum and, crucially, more opportunities for you to pat yourself on the back for the work you put in. Don't wait until you've reached the finish line to be proud of yourself.
The key difference here is flexibility. You plan to save regularly, but you're allowed to deviate when money's tight or when there's something else that you'd rather spend the money on.
What are the drawbacks of soft saving?
The unfortunate reality of soft saving is that while it prioritizes present day happiness over long-term security, it can put you in a bad position, especially if you're too flexible with your savings goals.
- Not having an adequate emergency savings fund can force you to take on costly debt in the event of an unexpected setback.
- Not prioritizing your retirement fund from an early age can leave you playing catch up in your later years, indefinitely delaying your ability to retire.
- Not making a commitment to building savings can create spending habits that are hard to break, even when your financial situation changes.
There's absolutely nothing wrong with wanting to have fun and enjoy yourself today, but ideally that shouldn't be at the expense of your happiness and comfort tomorrow.
What can we learn from soft saving?
The best part about soft saving is that it's barely any different than any other savings practice. Even the FIRE (financial independence, retire early) movement, which is basically the complete opposite of soft saving, has the same core concepts of setting goals, structuring your budget around those goals, and continually reviewing your progress.
The key is finding a plan that matches your priorities. In FIRE, that priority is sacrificing today's enjoyment for the sake of accumulating wealth and retiring early (at which point, you can start enjoying yourself). In soft saving, the priority is not losing sight of your current happiness and fulfillment while still keeping an eye on your future.
When thinking about how you want to manage money or build savings, the biggest step is always understanding what's important to you. If your plan or your goals don't connect to what's most important to you, you will struggle to stay on track.
No matter where you sit on the soft saving to FIRE spectrum, the important thing is that you find the method and motivation that works for you and you stick with it.
And if credit card debt is making it feel impossible to start saving money, MMI is here to help. We offer debt relief plans that can save you money, simplify your life, and have you out of debt 7x faster than doing it on your own.
