How confident should young people be about their future financial security? 

With the high cost of living, stagnating wage growth and lower job security, the answer for many might be 'not very'.

Yet of those in Generation Z aged between 18 and 24, some 38 per cent say they are confident in their financial future, according to data from pension firm M&G, shared exclusively with This is Money.

In comparison, just 17 per cent of those between 45 and 54 said the same.

Although almost half of Gen Z don't currently have a workplace pension, a fifth still expect to be able to retire when they are in their 50s. 

This is despite the fact their pension age is likely to be at least 68.  

It suggests young people's optimism might be down to a lack of information about how much they need to save for retirement - and how much of a difference it can make if they begin saving earlier in life.   

Around half of young adults say they are confident in having enough money to find the life they want to live in retirement, whereas just 29 per cent of 25 to 34-year-olds are confident of this. 

Even less, 25 per cent, of 45 to 54s think they can fund their desired retirement.

Younger people's optimism when it comes to their finances extends beyond just funding the retirement they want. 

As few as a third, 30 per cent, of the generation say they are worried about running out of cash during their retirement years.

In comparison, 44 per cent of those in their late 20s and early 30s are worried about their funds drying up in retirement. This rises to more than half, 52 per cent, of 35 to 44-year-olds.

Anusha Mittal, managing director of individual life and pensions and M&G, said: 'It's refreshing to see such positive attitudes from Gen Z towards their financial futures, but optimism alone isn't enough to guarantee a comfortable retirement.'

With this confidence though, comes a lack of action in preparing for retirement, with younger people instead focusing on their day-to-day spending and short-term saving.

As few as eight per cent of 18 to 24-year-olds say that building a pension pot is one of their financial priorities. Some 49 per cent said a priority was to spend money on things they enjoy.

I'd rather travel than save for retirement

Cynthia Wong, a 27-year-old assistant psychologist working for the NHS, told This is Money: 'Most of my savings go towards life experiences, especially travel, which I see as a valuable way to spend money while I am still young.'

'I believe that wealth is defined by meaningful experiences, and I prioritise them over saving for things that feel distant like retirement.'

Wong says she is aware that currently she doesn't have the financial responsibility of a mortgage or children.

She added: 'I suppose this reflects a broader Gen Z perspective. We would like to enjoy life as it happens and keep an optimistic approach towards financial futures.'

However, more than 60 per cent of people who haven't yet started planning towards retirement, which undoubtedly skews towards the young, say they don't plan to start setting themselves up for retirement until they are at least 40 years old.

'Personally, at my age, retirement feels so far ahead that it is hard to imagine what the future economy or my personal circumstances will look like,' Wong said.

'Because of this, I try not to put unnecessary pressure on myself to have everything mapped out at this moment.'

Wong does have a workplace pension, but says she hasn't considered whether or not it will be enough to fund her retirement.

For many young people, though, failing to prepare early in life will be too little, too late. 

According to 2024 data from Finder, opting for the default auto-enrolment contribution could leave today's pension savers with just half of what they need to retire.

This begs the question as to whether Gen Z's confidence in their futures is misplaced.

Could Gen Z be at risk of falling short?

Wong doesn't believe that she and other Gen Zs are failing to plan as such, instead she argues there are other priorities that are more important at this stage in her life.

She said: 'I expect myself to be able to build a stable and established career which allows me to sustain my current lifestyle and cover my essential needs,' Wong said.

'While I do not have a concrete vision of retirement right now, I do believe that my professional growth will eventually lead to more financial security as I progress.'

She added: 'I focus on building the foundations of my career and living a meaningful life in the present. My priority is ensuring that my career trajectory is moving in the right direction.'

M&G's Mittal said: 'Unless Gen Z's enthusiasm is matched by action - including better understanding of where their money is going, how much they're saving, and whether it's enough - they could be sleepwalking into a 'too little, too late' scenario when it comes to retirement readiness.'

'Too many young people still lack a clear understanding of how much they'll need to save, where to start -  or how to get there.'

According to M&G, more than half of Gen Z are looking to friends and family for retirement advice, and yet many of their older family members will have benefitted from defined benefit pension schemes, and found it easier to get on the housing ladder.

As a result of this, many may not realise that their current pension saving might not be enough for retirement.

Wong added: 'I do acknowledge that with people living longer, retirement planning may potentially be more complex for my generation than for previous ones. However, this may be something that I will consider more seriously later on.'