52% of Gen Z Is Taking a Gamble With Investing Money — Why It's Financially Unwise
Gen Z faces plenty of financial hurdles, from student debt and rising housing costs to inflation. However, a new Betterment report suggested one of the biggest threats to their long-term wealth may be self-inflicted: treating sports betting like investing.
The survey found that 52% of Gen Z respondents have redirected money intended for investing into sports betting at least once, far more than millennials (31%), Gen X (10%) and baby boomers (4%). While many young adults see betting as a way to make money, financial experts warn that confusion between gambling and investing could undermine their long-term financial goals.
Here’s a closer look at why more Gen Zers are betting instead of investing and what they can do to protect their financial futures.
Why Gen Z Is Turning to Sports Betting Instead of Investing
Sports betting has exploded in popularity, growing from a $400 million industry in 2018 to a $17 billion industry today. Betterment’s survey found Gen Z participates in sports betting at significantly higher rates than older generations:
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26% of Gen Z treats sports betting as a long-term financial strategy versus 12% overall
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52% of Gen Z have redirected investing funds to sports betting at least once versus 31% of millennials, 10% of Gen X and 4% of boomers
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14% of Gen Z redirect investing funds to sports betting multiple times per month
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Only 34% of Gen Z don’t participate at all versus 95% of boomers
For many young adults, sports betting is no longer viewed solely as entertainment. Instead, some see it as another way to grow their money, even though the odds and outcomes differ dramatically from traditional investing.
Why Financial Experts Say Sports Betting Isn’t Investing
The problem is not just the money lost on individual bets. Financial experts say the larger issue is the growing belief that speculation and investing are interchangeable.
“A key difference between sports betting and investing is that sports betting has a negative expected value by design,” said Kyle McBrien, certified financial planner and senior financial planner at Betterment. “The house takes a cut on every wager, so the math works against you over time regardless of how much research you do. Investing in a diversified portfolio has positive expected returns in the long-run because you’re participating in economic growth.”
The risk becomes even greater when betting competes with long-term investment goals.
“For younger investors especially, it’s easy to underestimate the opportunity cost of taking money out of the market,” McBrien said. “A dollar that isn’t invested today also misses out on years of potential growth and compounding.”
For example, a Gen Zer who redirects $100 per month from investing to sports betting could miss out on more than $50,000 in potential wealth by age 65 because of lost compound growth.
Part of the problem may be where younger investors are getting financial information. The survey found that 60% of Gen Z uses social media for financial news, and social media can blur the distinction between investing and gambling, and create false confidence in high-risk financial decisions.
How Gen Z Can Separate Investing From Gambling
While the survey findings highlight a concerning trend, financial experts say it’s possible to course correct.
Gen Z can start by:
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Automating investing, which removes the temptation to redirect their funds to betting
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Keeping separate accounts for “fun money” and investment money
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Seeking guidance from a financial advisor, mentor or trusted family member
For money intended to build long-term wealth, McBrien recommended using a diversified portfolio.
“Thankfully, products such as exchange-traded funds (ETFs) make it easy to build a diversified portfolio without needing to pick individual stocks,” he said. “Investing in a 401(k), IRA or diversified brokerage account gives investors an opportunity to participate in long-term market growth and benefit from compounding.”
He also urged young investors to assign every dollar a specific purpose.
“Retirement savings, emergency funds and money earmarked for major financial goals shouldn’t be treated as money available for speculation,” McBrien said.
If someone chooses to bet, experts recommend treating it strictly as entertainment spending rather than as a wealth-building strategy.
“Set a specific amount you’re comfortable losing and keep it separate from retirement contributions, emergency savings and other long-term goals,” McBrien said. “The key is establishing the guardrails before you start betting. If you have money set aside for your 401(k), IRA or a specific financial goal, that money should stay dedicated to that purpose.”
For Gen Z, understanding the difference between investing and gambling could have a major impact on future wealth. While both involve risk, only one is designed to help money grow over time. The earlier young adults recognize that distinction, the more time they give their investments to benefit from long-term market growth and compounding.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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