As we live in a multigenerational America, with each generation comes different views on money. Whether it’s investment strategies, spending habits or confidence in their financial knowledge, each generation differs from one another when it comes to their finances. However, among all of the generations, it’s Gen Z that is proven to have the lowest financial literacy levels.
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According to the New York Post, Gen Z will represent 27% of the workforce by 2025. Despite their growing presence in the workforce, a recent WalletHub survey found that more than one-quarter of Gen Z admits to lacking confidence in their financial knowledge, making them the least financially confident generation.
Ultimately, this shows in their spending and investing habits. The survey also found that 57% of Gen Z individuals prefer a savings account 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 these levels are even lower among Gen Zers who don’t attend college — financial experts say there are several reasons as to how this came to be.
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Why Gen Z Has the Lowest Financial Literacy Levels
Of all the age groups, Gen Z is a particularly fast-paced generation. Functioning with more of a “need to know” mindset, Gen Z may only think about their financial literacy when it starts to affect them. For instance, they might not think about building their credit score until they find themselves in a situation where it affects them.
“Financial literacy isn’t something widely taught in high school or college, and many of us didn’t grow up in especially financially literate homes,” said Michael Broughton, co-founder and CEO of ALTRO, an app designed to help people gain financial literacy and control. “[Now that we] are in the early stages of taking control of our finances and are experiencing a shift in economic mobility, the term ‘financial literacy’ can bring up more questions than answers.”
As Broughton noted, one of the biggest reasons that Gen Z has the lowest confidence in their financial skills is because financial literacy is not something that is taught in schools. In the United States, students don’t gain a formal education in personal finance, leaving many Gen Zers feeling unprepared when they enter the workforce and have to manage their own finances.
“Additionally, their predominantly digital interactions with money, such as only using a credit card or paying online, makes their experience virtual and limits hands-on experience with managing finances, making it harder to grasp the consequences of financial decisions,” said Einat Steklov, co-founder and CEO of Kashable, a financial company that provides employee-based loans.
Steklov said that the digital world Gen Z has grown up in, as well as the economic uncertainty they’ve had to face in the last few years, has brought on a level of financial unpredictability and skepticism toward traditional financial planning and investment.
Another reason for Gen Z’s low financial literacy levels is the fact that we’ve simply stopped talking about money, according to David Delisle, a financial author and founder of The Awesome Stuff.
Gen Z doesn’t talk about money because their parents and their parent’s parents didn’t talk about money. Therefore, every generation is less financially prepared than the previous one.
“And to make matters worse, we’re seeing rising costs as inflation outpaces incomes and our kids are suffering,” Delisle said. “We also continue to have shame, insecurity and judgment around money, so we’re even less likely to discuss financial literacy with our kids.”
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Ways To Improve Gen Z’s Financial Literacy
One of the biggest ways for Gen Z to improve their financial knowledge is by educating themselves on the basics. This can include learning about different types of credit, how a credit card works or how to open a bank account. Educating yourself on finances can be done through reading personal finance books and blogs, subscribing to financial content, listening to podcasts or talking with a financial professional.
“Even if it’s just spending an hour each day with financial literacy content, you’ll be on a path to creating a healthy relationship with money, and that’s the goal of any financial education,” Broughton said.
Another more systemic solution is to instill financial education via schools early on. Making finance courses a required part of the curriculum ensures that this knowledge is taught to all students universally. Mentorship programs can also be a helpful financial literacy tool for students.
“It is hard for Gen Z to think about retirement lifestyle when most of them have not yet entered the workforce,” Steklov said, “but it is important to emphasize how critical it is to save for it early on. Mentorship programs and tailored financial products that provide educational resources and real-world learning opportunities can also play significant roles in learning and development.”
A third solution to help with low financial literacy levels among Gen Zers is for parents to talk about money with their kids. Simply talking about how much things cost or why parents are choosing not to buy something can be a good start to educating kids on basic spending knowledge and smart financial decisions.
Why Gen Z Needs To Become More Financially Literate
Just like Delisle said, each generation is less financially confident than the one before it. Therefore, Gen Alpha — the age group following Gen Z that consists of people born between 2010 and 2024 — is at risk for low financial literacy levels if Gen Z isn’t educated on personal finance.
“This is a beginning,” Delisle said, “and if you don’t start, the next generation will be even less financially aware.”
Gen Z should focus on becoming more financially literate to benefit both themselves and generations to come.
“By prioritizing the critical elements in the financial education of Gen Z, we can equip future generations with the tools they need to navigate financial complexities effectively, laying the groundwork for a more financially literate future,” Steklov said.
Building up your financial skills, knowledge and confidence is an important habit to maintain if you want to accomplish many other things in life, Broughton said.
“Building a strong foundation in financial literacy will support short-term and long-term life goals such as finally getting that passport stamped, getting an education, running a business, tracking personal spending, getting rid of debt and buying a house,” he said. “Becoming financially literate is a lifelong skill-building journey, and just like any other relationship, your relationship with money requires 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
