From 1981 to 1996, millennials and Gen Z—born From 1997 to 2012—represented a sizable fraction of Bangladesh’s population. Their digital-native upbringing, entrepreneurial energy, and quest for financial independence define these generations. Between millennials and Generation Alpha, Gen Z falls in the second-youngest generation. The digital era, climate anxiety, a changing economic scene, and COVID-19 have all helped to define Gen Z’s identity, the first generation to grow up on the internet. Rising living expenses and employment uncertainty are other financial difficulties they must contend with.

The distinguishing features between Gen Z and millennials

Millennials and Generation Z, formed by their distinct experiences and digital-first lifestyles, are altering the financial environment. Their demands for convenience, personalisation, and social impact are causing a shift in how financial products and services are delivered.

These tech-savvy and digitally-minded generations want to manage their funds using mobile banking and Internet tools. They desire openness, accessibility, and new solutions that meet their needs. Their willingness to take measured risks has prompted them to consider alternative ventures such as Bitcoin, crowdfunding, and peer-to-peer lending.

Aside from financial rewards, millennials and Generation Z prioritise social impact and ethics in their investing selections. They are more inclined to make sustainable and socially responsible investments that reflect their values. Furthermore, they expect personalised financial advice for their specific goals and desires.

Convenience and customisation are critical for these generations. They want financial goods to be instantly available and seamlessly integrated into their digital lives. Transparency in terms of fees, conditions, and product features is critical for them. Furthermore, they value financial education and empowerment, actively seeking tools and resources to help them make sound financial decisions.

While their short-term goals frequently concentrate on debt repayment and emergency savings, millennials and Generation Z value flexibility in their financial decisions. They look for products that allow them to adapt to shifting conditions.

Finally, these generations are causing a change toward values-based financial decisions. They are more prone to consider ethical and social concerns when making purchase decisions and are willing to pay a premium for things that reflect their values.

Generation Z and Millennial Buying Habits and Psychology

Generation Z people generally have strong opinions about racial justice and environmental issues. Young people’s activism is critical to the success of initiatives like the Global Climate March.

Climate change is one of numerous things that Gen Zers are particularly concerned about. They frequently urge personal, public, and global reforms to prevent similar disasters. Many Generation Z members are environmentally conscious, and most expect businesses and organisations to adhere to sustainability.

Gen Z is attracted to Experiences, Not Assets.

Villas and assets are not Gen Z’s goals. They want to sample villa living for a short time. Their mindset is very different from that of the preceding generation, which valued goods.

Millennials come from impoverished backgrounds, while Gen Z was raised in abundance. They are also more concerned about social and environmental issues and are willing to pay a premium for products and services that align with their values.

How do financial products work?

Financial products work on a basic finance principle: the time value of money. This principle dictates that 100 BDT today is worth more than 100 BDT a year later, primarily because of inflation. To gain the expected return, investment decisions usually depend on three primary sources:

1. Risk vs return: An investment’s risk is its possible negative outcome or the worst-case scenario. Meanwhile, “Return” refers to the expected financial return from an investment. These two have a directly proportionate relationship. Investors typically anticipate more significant gains in exchange for assuming greater risk, as seen in the risk-return trade-off.
2. Dimensions of Time: Investments kept for a shorter time frame, usually less than a year, are called short-term investments. Investments kept over several years, or even decades, are considered long-term. The longer the period, the higher the rate of return demanded.
3. Liquidity means how easily an investment can be bought or sold without significant loss in value. Money is considered the most liquid asset. Illiquid assets offer greater returns than liquid assets.

Financial Product Categories

1. Debt securities: Debt securities are financial instruments that serve as a loan from the investor to the issuer. By purchasing a debt security, one essentially loans money to the issuer, a government, corporation, or other organisational entity. The issuer guarantees that the investor will receive the principal (the original borrowed amount) plus interest in return for the loan.
2. Equity securities: Equity securities, such as stocks or shares, symbolise firm ownership. By purchasing equity, one acquires a portion of a corporation. Owners gain returns by receiving dividends or selling the share at a higher price. It can be further divided into common stock and preferred stock.
3. Bank deposits: Savings accounts, checking accounts, and CDs are examples. Because the bank guarantees them, deposit products are usually considered low-risk investments.
4. Mutual Funds: Mutual Funds allow many investors to pool their money in different types of securities, like stocks, bonds, and other assets. Professional fund managers manage their portfolios in return for some brokerage fees. It ensures diversification to reduce risk and liquidity.
5. Financial instruments known as derivatives derive their value from the value of an underlying asset. Anything from a stock or commodity to an interest rate or currency could constitute this underlying asset. Derivatives are frequently used to raise leverage, speculate on market movements, and hedge risk. Common types of derivatives are future contracts, options, swaps and forwards.

Which products are suitable?

1. The Savings Certificate is the most popular debt certificate of the Bangladesh government, overseen by the Internal Resources Division of the Bangladesh Ministry of Finance. These schemes publish their profit margins annually after eliminating the 5% source tax. Bangladeshi post offices and banks sell and enclose these certificates.

Three key schemes are available for millennials and Gen Z’s

1. Family Saving Certificates or Paribar Sanchaypatra is a 5-year savings initiative. Designed for women, Paribar Sachaypatra allows adult women over 18 to invest Tk 10000 to Tk 45,00,000. If encashed after five years, this program returns 12.2%.
2. Quarterly Profit-based Savings requires a minimum investment of Tk 1,000,000 and a 3-year maturity period. The maximum investment for a single owner is Tk 30,00,000, and for a joint owner is Tk 60,00,000. For a 3-year investment, returns average 11.8%, however premature withdrawal returns vary by year.
3. Bangladesh Saving Certificates—This five-year savings scheme pays 12.2% at maturity and different returns for premature withdrawal based on investment term. This initiative allows individuals to invest up to Tk 30,00,000 and joint investors up to Tk 60,00,000.

2. Treasury Bond and Treasury Bills

Unlike savings certificates, these securities are tradable in the secondary market. The interest rate is determined by auction, which happens on Tuesday for T-bonds and Sunday for T-bills. A bid can be submitted for TK. 1,00,000/—or any amount of its multiple on auction through the primary 24 dealers. Investors will need a BP account in that dealer bank to take part in the auction. They can buy and sell those securities at any time in the secondary market.

Treasury bills are short-term government debt securities available for 91 days, 182 days and 364 days, with 11.58%, 11.8%, and 11.95% interest consecutively.

Treasury bonds are long-term investments available for 2 years, 5 years, 10 years, 15 years, and 20 years, with 12.24%, 12.40%, 12.55%, 12.65%  and 12.75%.

3. Mutual Funds

Professional fund managers analyse the local market and choose acceptable investments for mutual funds that benefit those without the time, skills, or money to manage their investments actively. There are two types of mutual funds. Open-end mutual funds permit investors to buy and sell units anytime, issuing and redeeming shares based on demand. Closed-end mutual funds trade on stock exchanges’ secondary markets and have a set number of units.

Mutual funds serve different investing goals, risk appetites, and time horizons. Investors can choose equity, fixed-income, balanced, growth, and shariah funds. This variation lets investors match their investments to their financial goals and preferences. In addition, Mutual funds offer tax benefits under specific conditions. For closed-ended mutual funds, dividend income up to Tk 50,000 is tax-free; for open-ended, Tk 25,000 per fiscal year.

4. Stocks: Recent economic growth and growing investor interest have propelled Bangladesh’s stock market’s ascent. The Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) are the leading exchanges. The stock market in Bangladesh is beneficial in the near term but not in the long run. The DS30 stock portfolio’s annual market return from February 3, 2013, to May 30, 2022, assuming yearly compounding and omitting dividends, was 4.92 per cent. Bank fixed deposits yielded 6–8% annually during this time.

The evolving financial landscape in Bangladesh, shaped by the distinct preferences and priorities of millennials and Gen Z, reflects a broader shift towards convenience, transparency, and values-driven decision-making. These generations, defined by their digital-first lifestyles and social consciousness, are influencing how financial products are developed and delivered. They prioritize ethical and sustainable investments, demand personalized financial services, and seek tools that align with their goals for flexibility and empowerment. With options ranging from savings certificates and treasury bonds to mutual funds and stocks, Bangladesh offers diverse investment opportunities catering to various risk appetites and financial objectives. As these younger generations continue to engage with financial markets, their focus on customization, social impact, and technological integration will drive further innovation in financial products and services.

Author: Tasnim Safwan