In 2021 the oldest members of Generation Z will be 24 years old, making the bulk of this generation teenagers and young adults who are already starting to enter the workforce. While financial literacy may seem like another buzz word it actually might be one of the most valuable life skills a person can learn in their formative years. Mac Gardener, a certified financial planner and financial literacy advocate, even told CNBC he believes “the number-one behavior children learn from their parents is spending habits,”. This is something that can actually widen the wealth gap when we consider that wealthy families most likely have the luxury of resources to teach financial competencies to their children.
We’ve all seen the memes that proclaim the only certainties in life are death and taxes but does Gen Z even know how to do their taxes? We’re taking a closer look.
Throughout history economic booms and busts have greatly affected generations of people and how they think about money and personal finance. Most recently we’ve seen the effects of the Great Recession of 2008 on Millennials. Between entering the job market during an economic crash and the student debt crisis reaching an all time high it’s almost universally agreed upon that Millennials were screwed. According to a study done at GW Business School, only one third of adults worldwide have an understanding of basic financial concepts. This led us to wonder how this affects Generation Z especially due to a very prevalent issue: the COVID-19 pandemic. Not only did this cause the economy to crash but also skyrocketed unemployment rates which had a huge effect on those graduating from high school and college in 2020 who are looking for work.
To dig deeper into Generation Z and their level of financial literacy Experian surveyed a group of 545 recent high school graduates. According to this survey only 19% of Gen Z reported feeling that they had a solid grasp on the concept of credit. However, a total of 49% of Gen Zers surveyed said that they found financial topics to be somewhat interesting. This is particularly important because it shows almost half of this generation is interested in learning more about personal finance.
According to the same survey by Experian, only 36% of Gen Zers said they had taken a class on a financial topic in an academic setting however, among that group, many of them still had additional financial questions. Additionally, of the group who hadn’t taken a class, 43% said they wanted to learn to save money, 38% wanted to learn how to manage their expenses, and another 36% said they wanted to take a class that taught them how to file their taxes. Possibly the most salient statistic was that 76% of Gen Zers said that they thought their high school should’ve offered a course on managing finances.
The big takeaway from this survey is that Gen Zers want to learn more about financial topics, and many think it would be beneficial to have it in a classroom setting. Public schools who don’t have classes on these topics are most likely bound by lack of resources and funding. While classes such as ‘tech-ed’ or ‘home ec’ may seem antiquated it may be time the education sector evaluates a way to bring applicable life skills into the classroom.
Due to the increased job insecurity of the COVID-19 pandemic, as well as student debt numbers still rising, financial difficulties and uncertainty has the potential to have a huge effect on Generation Z. Lifeworks conducted a study of 751 Gen Zers from the US, Canada, and the UK which determined that 41% cited student loan debt within their top five financial stressors. The most alarming thought about this statistic is that we should consider that the oldest members of Gen Z began graduating from university in 2019. If the age-range of this generation is taken into account that begs the question: are students worrying about student loan debt prior to even graduating and having that debt take effect?
Yes, we’d need more comprehensive data to answer this but it’s still worth noting how financial stressors are affecting this generation. The American Psychological Association cites that 81% of Gen Z adults (aged 18-21) are stressed about money. Comparatively about 64% percent of all other adults report some level of general stress not related to a specific topic. With all this uncertainty in the field of financial literacy the real-world impacts of financial stress are already taking a toll on this generation.
If you feel as though stress levels are taking a toll on your health please ask for help from those close to you or utilize resources such as NAMI, the National Alliance for Mental Illness.
Due to the great recession and difficulties Millennials have faced in the area of finance and personal wealth many innovations and tools have been developed in recent years. From social media personalities on YouTube or TikTok, or new technologies for banking and investing Millennials have made this industry more accessible. Many new technologies, like Robinhood and Acorns, have brought the very confusing world of investing right to an app on your phone. Both of these applications aim to make investing easier with a small amount of money, as most people assume that investing is for the wealthy and many brokerage accounts require a minimum deposit of $5,000 or more.
With the many resources currently available and the creativity we’re already witnessing within Gen Z, this generation could continue innovations within finance and democratizing the knowledge of wealth-building. There are still many barriers in place, like unemployment due to COVID-19 and the student loan crisis which we are not seeing an end to. We suggest taking your financial well being into your own hands as early as possible and to seek out resources from a trusted source. If you have any financial struggles or topics you’d like us to cover, reach out via social media.