Why do experts advise Gen Z to give up cash and learn how to buy time?

(Dan Tri) - The ultimate weapon of young people is not capital, but time. But how to turn this advantage into an asset? The answer can change your financial future.

In a world of change, Gen Z and Millennials are facing a harsh reality: the path to wealth accumulation that previous generations took, based on job stability and housing prices, no longer seems to be open. The system seems to be stacked against them.

David McWilliams, an economist and former US central banker, bluntly calls this a “rigged system” that disadvantages young people starting out without inherited wealth. However, he insists that the system can still be “unboxed.”

And paradoxically, the biggest mistake young people are making in trying to "decode" it comes from fear itself.

The Paradox of Safety

According to a recent Bankrate survey, 29% of Gen Z and 24% of millennials said they were wary of the stock market because of its complexity and risk. They chose to keep their money in cash or savings, believing it was a “safe” way to preserve capital.

But Josh Brown, CEO of Ritholtz Wealth Management, calls this “the biggest mistake.”

“When you’re young, if you’re more risk-averse than opportunity-focused, that’s a mistake,” Brown says. “You have to build wealth before you can think about preserving it.”

Playing it safe by holding cash is a dangerous illusion. Inflation, the silent enemy, will erode the value of your money day by day. Feeling safe today will cost you financial ruin tomorrow.

Gen Z is entering a new financial game where the previous generation's "formula for success" no longer works (Photo: Getty).

Time - the ultimate weapon and the story of 12%

The reason financial experts are urging young people to take risks is because of an advantage that money cannot buy: time.

For those in their 20s and 30s, they have decades for the power of compounding to kick in and smooth out any short-term market fluctuations. “When you’re young, you have something every professional investor dreams of: time,” Brown says.

Historical data is undeniable. According to statistics by Professor Aswath Damodaran (New York University), from 1928 to 2024, the S&P 500 index (representing the largest US stocks) brought an average return of nearly 12%/year. Meanwhile, 10-year US Treasury bonds only achieved about 5%/year.

A difference of a few percentage points may seem small, but with the power of compounding over 30-40 years, it creates a huge wealth gap. Investing in stocks, while risky in the short term, is actually the safest way to "de-risk" and not get poorer in the long term.

So, how should young people get started? The answer is not to try to "catch the bottom, guess the top" or look for stocks that "change your life" overnight.

“Use index funds,” Brown advises. These funds replicate the entire market, providing instant diversification and minimizing the risk of individual stocks falling. ETFs like Vanguard Total World Stock, which invest in global stocks, are considered a “one-and-done” option that’s especially effective for beginners.

5 sharp financial mindsets to decode the game

But investing tools are only part of the equation. To truly win, Gen Z needs to be equipped with a sharp financial mindset. David McWilliams has outlined five core rules:

Obsessed with "cash flow," not story

The first rule is to learn how to invest properly. Don't chase stocks that just have a good story and promise a bright future. "Find companies that generate real earnings, because earnings are the key," McWilliams says. Your money should be able to make more money.

Understanding Interest Rates - the Gravity of Finance

McWilliams calls interest rates “the price of money.” Everything in the economy revolves around them. “If you don’t understand interest rates, you’ll be crushed by them,” he warns. A small change in central bank interest rates can have a huge impact on asset prices, from real estate to stocks. Understand them and you’ll understand the flow of the entire economy.

Know when you're lucky

Investing success always involves an element of luck. “One of the biggest mistakes is falling in love with your own success,” says McWilliams. Recognizing when your wins are due to luck will help you avoid arrogance, which can lead to underestimating risk and making disastrous decisions later.

Distinguishing between "bad luck" and "stupidity"

Don't blame fate for every loss. There's always an element of randomness in the market that you can't control: bad luck. "But a lot of the time, we make bad decisions," McWilliams says frankly. Be honest with yourself, analyze your mistakes so you don't repeat them. That's the only way to grow.

Go deep, don't spread yourself thin: In a world of information noise, the final rule is focus. "Pick one area, know it well, and be great at it. Forget the rest," McWilliams advises. Rather than trying to know everything superficially, deep understanding will give you the calm and confidence to make the right decisions even when the market is turbulent.

The financial game has never been easy, especially for the younger generation. But by giving up the fear of short-term risks, leveraging the ultimate weapon of time, combining smart investment tools and a sharp mindset, Gen Z is fully capable of not only surviving, but winning and rewriting the rules of the game for their own financial future.

Source: https://dantri.com.vn/kinh-doanh/vi-sao-chuyen-gia-khuyen-gen-z-tu-bo-tien-mat-de-hoc-cach-mua-thoi-gian-20251011073149512.htm