We know that Gen Z is very tech-savvy. That’s not surprising since most of them grew up with digital devices. The only generations that are even more tech-savvy are Gens Alpha and Beta who were handed digital devices almost immediately after they were born, literally in some cases. Unfortunately, this savviness doesn’t carry over to budgeting or other areas of financial education. If it did, Gen Z may not collectively carry all of the debt that it does. It’s time to explore exactly how financially literate Gen Z is.
The Stats Are Far From Encouraging
The TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) recently did a study together. Its findings were both staggering and concerning about Gen Z’s collective financial literacy. Only 43% of adults aged 18 to 27 who took the survey were able to answer questions measuring or talking about financial literacy.
Bank of America did a survey and the results weren’t very encouraging. Its research and survey results revealed that about 47% (close to half) of Gen Zers have some form of debt. It comes in many forms, but the most common ones are credit card debt and student loan debt. That’s concerning because Gen Zers may have crippled themselves financially before they could even become successful in their careers.
Only 24% of Gen Z respondents got all basic financial questions right in the recent FINRA survey.
What is Financial Literacy
You may have been wondering what is included in and defines financial literacy. Here’s your answer. A person is considered to be financially literate if he or she can understand and know how to apply key financial concepts to daily life. These include concepts like budgeting, saving, investing, and managing credit. An individual who fails to understand and apply these basic concepts will likely not be very financially successful in life.
Why is it a Big Problem if Gen Zers Don’t Understand the Concept of Money?
People who don’t understand how to invest and manage finances tend to be in much more debt more often. That characterizes Gen Z. There’s a reason for that. Financially illiterate people tend to not understand the concept of money and how it works. They may think that money is easy to earn. That mentality tends to be their downfall as they tend to get in over their heads with various types of debt – from student loan debt to credit card debt, and other types of debt.
These people tend to struggle more and are even forced into bankruptcy sooner and more often What’s worse is that most Gen Zers are unaware of the three credit scoring agencies. They also tend to not understand how FICO scores work either and how that affects their credit rating and ability to get loans and even find good jobs.
Gen Zers also tend to be ignorant about how interest rates work and how to spend and manage money responsibly. Consequently, far too many Gen Zers aren’t setting up retirement accounts. That’s worrying because while they are required to pay into social security, they likely won’t get a penny from it when it’s time for them to retire.
Gen Zers tend to spend recklessly and make other poor financial decisions that prolong the cycle of debt for them. All of this and more tends to create and sustain financial instability. Their lack of financial literacy handicaps them in another way. They don’t always understand how to negotiate the best offer when they are accepting a job offer.
Gen Z’s Financial Illiteracy May be a Sign of the Times
Many other generations of Americans are also bad with money. So, Gen Z’s collective financial illiteracy may just be a sign of the times in America.
