We live in a multigenerational America, and each generation has a different perspective on money. Each generation is different when it comes to finances, including investment strategies, spending habits, and confidence in their financial knowledge. However, Gen Z has been found to have the lowest levels of financial literacy of all generations.
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According to the New York Post, Gen Z will make up 27% of the workforce by 2025. Despite their growing presence in the workforce, a recent WalletHub survey found that more than a quarter of Gen Zers admit they lack confidence in their financial knowledge. They are the least financially confident generation.
Ultimately, this shows up in their spending and investment habits. The survey also found that 57% of Gen Z prefer savings accounts as their go-to investment method. To put this into perspective, 46% of baby boomers prefer investing in stocks.
While it may be surprising that Gen Z has the lowest financial literacy levels, and even lower levels for Gen Z who haven't attended college, financial experts say they have no idea why this is the case. He says there are several reasons.
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Why Gen Z has the lowest financial literacy level
Of all age groups, Gen Z is the fastest-paced generation. Because Gen Z has a “need to know” mindset, they may only think about their financial literacy when it starts to be affected. For example, you may not think about building your credit score until you find yourself in a situation where it affects you.
“Financial literacy isn't something that's widely taught in high school or college, and many of us didn't grow up in particularly financially literate households,” said the co-founder of ALTRO, an app that helps people get money. said Michael Broughton, founder and CEO. Financial literacy and control. “[Now that we] As we are in the early stages of taking control of our finances and experiencing changes in economic mobility, the term 'financial literacy' can raise more questions than answers. ”
As Broughton pointed out, one of the biggest reasons Gen Z has the lowest confidence in their financial skills is because financial literacy isn't something they're taught in school. In the United States, students lack formal education in personal finance, leaving many Gen Z feeling unprepared when they enter the workforce and have to manage their finances.
“Additionally, interactions with money are primarily digital, such as using credit cards only or paying online, making the experience virtual and limiting practical experience in financial management and making financial decisions more difficult. It becomes difficult to understand the consequences of this,” Einat Steklov said. , co-founder and CEO of Kashable, a financial company that offers employee-based loans.
Steklov said the digital world in which Gen Z grew up and the economic uncertainty they've had to face in recent years has created a level of financial unpredictability and a shift away from traditional financial planning and investing. He said this has led to some skepticism.
Another reason Gen Z's financial literacy levels are low is the fact that we've simply stopped talking about money, said David Delisle, financial author and founder of The Awesome Stuff. I am.
The reason Gen Z doesn't talk about money is because their parents and their parents' parents didn't talk about money. Therefore, each generation is less financially prepared than the previous one.
“To make matters worse, costs are rising because inflation is outpacing incomes, and children are suffering,” Delisle said. “And because we continue to carry shame, anxiety, and judgment around money, we are even less likely to discuss financial literacy with our children.”
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How to improve financial literacy for Gen Z
One of the biggest ways Gen Z can improve their financial knowledge is by learning the basics. This includes learning about the different types of credit, how credit cards work, how to open a bank account, and more. To learn about finance, you can read personal finance books and blogs, subscribe to finance content, listen to podcasts, and talk to financial experts.
“Even if you spend just one hour each day with financial literacy content, you'll be on the path to building a healthy relationship with money. That's the goal of financial education,” Broughton said.
Another, more systemic solution is to instill financial education early through schools. Making finance courses a required part of the curriculum ensures that this knowledge is universally taught to all students. Mentorship programs also serve as a financial literacy tool for students.
“It's difficult for Gen Z to think about their retirement lifestyle when most of them are not yet in the workforce,” Steklov said. Mentorship programs and customized financial products that provide educational resources and real-world learning opportunities also play an important role in learning and development. ”
A third solution to help Gen Z's low financial literacy levels is for parents to talk about money with their children. Simply talking about the prices of things and why parents don't buy them is a good start in educating children about basic spending knowledge and smart financial decisions.
Why Gen Z needs to increase financial literacy
As Delisle said, each generation is less financially confident than the one before it. Therefore, Generation Alpha, the generation following Generation Z, consisting of people born between 2010 and 2024, will have lower levels of financial literacy if Generation Z is not educated about personal finance. There are risks.
“This is a start,” Delisle said. “If you don't start, the next generation will be even less financially aware.”
Gen Z needs to focus on becoming more financially literate to benefit both themselves and future generations.
“By prioritizing key elements in Gen Z’s financial education, we aim to equip future generations with the tools they need to effectively navigate financial complexities and lay the foundation for a more financially literate future.” ,” Steklov said.
Broughton says increasing your financial skills, knowledge and confidence are important habits to maintain if you want to achieve many other things in life.
“Laying a strong foundation of financial literacy will ultimately help you in the short and long term, whether it's stamping your passport, getting an education, running a business, tracking personal spending, getting out of debt, or buying a home. “It will support your life goals.” “Becoming financially literate is a lifelong skill-building journey, and like any other relationship, your relationship with money requires an investment of time, energy, and intention.”
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This article originally appeared on GOBankingRates.com: Gen Z has the lowest financial literacy levels — experts explain why
