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Why Financial Literacy Is Vital for Gen Z

The United States population now spans 5 generations ranging from the Silent Generation to Gen Zers, with boomers, Gen Xers, and Millennials in between.

Each generation exhibits varying degrees of financial literacy.

People who score higher on financial literacy tests are more likely to follow recommended financial practices, improving their economic mobility.

Lower scores on financial literacy tests, however, are a contributing factor for those who aren’t following standard recommended financial practices, lessening economic mobility and expanding the wealth gap.

Which begs the question, which generation lags when it comes to financial literacy?

Gen Z Is Behind in Terms of Financial Literacy

According to the 2021 TIAA Institute-GFLEC Personal Finance Index, financial literacy tends to be low within each of the 5 generations but predominantly among Gen Z or Zoomers.

The survey covered eight components of personal finance: Earning, saving, consuming, investing, insuring, borrowing and managing debt, understanding risk, and go-to information sources. Two-thirds of Gen Z could answer only half or less of the index questions correctly.

Another survey by the Global Financial Literacy Excellence Center found that only 57 percent of young adults aged 18-24 are considered financially literate.

Wait, What Even Is Financial Literacy?

It’s critical to remember that financial literacy is not just one skill.

Financial literacy involves understanding and effectively using different financial skills.

It’s the foundation of your relationship with money and a lifelong learning journey that should start early.

Financial Hurdles for Gen Z That No One Else Has Faced

Money is hard and getting harder, especially for younger workers.

Defined as anyone born after 1996, Deloitte’s 2022 Gen Z and Millennial Survey sheds light on the younger-gen precarious financial footing in our increasingly expensive world.

While the current high inflation is hurting everyone, younger employees are vulnerable to financial anxiety. When questioned about their most pressing concern, the cost of living (housing, bills, and transport) was the top worry cited by Gen Z (29 percent).

Only a quarter of Gen Z admits they can comfortably cover their monthly living expenses, and almost half (46 percent) report they live paycheck to paycheck with little hope that things will improve.

26 percent of Gen Z don’t feel confident that they’ll be able to retire. Given the likely erosion of government programs like Social Security, Gen Z will need to take greater responsibility for the resources they’ll need in retirement.

Add student loan debt to the picture—almost $33k per borrower—and it’s not that difficult to see why Gen Z is burdened with burnout and mental health challenges.

Why Financial Literacy Is Vital for Gen Z

As Gen Z takes up more space in the adult population, teaching them to make smarter money decisions will give them what we call the 3 Cs:

  1. Clarity

Learning the basics of how money works will clarify the thinking of Gen Zers.

It will help them understand and put into perspective all the financial decisions (using a credit card, taking out a student loan, etc.) they’re expected to make.

According to Daniel Lerner, Executive Vice President, Investment Services at David Lerner Associates, “Financial literacy will give Gen Zers a set of guidelines they can use in different situations. Since they’re now acutely aware of their own money biases and predatory marketing tactics used by advertisers, they can be more discerning about their purchases.”

They can avoid getting into debt traps since they’ll be aware of how bad debt can be detrimental to their future.

  1. Control

It’s not easy being a youngster in this economy, with many Gen Zers not feeling they have control over their lives and finances.

Being financially literate gives this young generation the sense of control they desperately need. Financial literacy teaches them to think long-term and view their future as a function of the actions and decisions they make now.

Instead of wildly hurtling toward an uncertain future, they will feel like they’re in control and can steer their life in the direction they’d like.

It will train them to look for and carefully consider different options instead of settling for the first one they come across, or gauging whether they really need it.

  1. Confidence

By attaining this level of clarity and a sense of control, Gen Z is likely to display a strong sense of confidence.

They will recognize that while everything they have learned seems relatively simple, living by these principles can be quite difficult and require a strong sense of discipline. But they will also understand that this sense of discipline is easier to build at a young age because it gets hard wired and then grows instinctive as they age.

They won’t fear ‘adulting’ anymore since they’ll understand how to navigate and deal with money.

How Can We Improve Financial Literacy Among Gen Zers?

Gen Z can sometimes be approached like they are from a different planet, entirely alien to the rest of the population. And while there are a few differences among generations, these pale compared to the similarities among the other generations.

It’s a crazy world out there, and not just for Gen Z. Early financial education is the solution. Schools and colleges should incorporate financial education in their curriculum.

Failing to teach Gen Zers how to navigate life from a financial standpoint knowledgeably is like letting them cross a busy street with blindfolds on.


Financial literacy rates in Gen Z are among the lowest — we should change that!

Gen Zers are just finding their feet amidst a myriad of challenges at a young age.

Inducing the nitty-gritty of personal finance in the lives of Gen Zers in their formative years could go a long way in shielding them from future uncertainties and helping them be better equipped to reach their financial goals.


Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc.

This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.

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