The Road To Financial Security: Why Gen Z Needs A Financial Education A solid financial education will give Gen Z-ers clarity, control, and confidence, while saving them a whole load of financial headaches, heartaches, and misery.
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Gen Z, the generation born between the mid-1990s and the mid-2010s, is now the largest generation ever, comprising almost 30% of the global population. Given the current worrying state of the world economy with rising inflation, unemployment, and a looming recession, Gen Z is worried about their financial future. And, well, they should be.
The dizzying pace of technological advancement, the rapidly shifting social norms, and the high likelihood of them being part of the gig economy, with its unpredictable income streams and lack of corporate safety net, add an additional layer of instability and insecurity to their financial concerns.
Recent research by the Teachers Insurance and Annuity Association of America (TIAA) Institute has also shown that Gen Z has the lowest levels of financial literacy than any generation before them. All this makes for an explosive mix, with a huge downside.
Money is intricately entwined with almost every aspect of adulthood, from deciding on a career, a credit card, a car loan, or a mortgage, as well as investment options to starting a business, getting married, having kids, and retiring comfortably.
Omitting to teach Gen Z-ers how to knowledgeably navigate this morass from a financial standpoint is dangerous and irresponsible. Falling back on the age-old narrative of "They'll pick this up as they go along; after all, we did" is unimaginative, and it also makes us guilty of willful ignorance. Ensuring Gen Z has access to quality financial education will help them make smart money decisions, and it will give them three distinct advantages:
1. Clarity: Learning how money works will clarify their thinking. It will help them understand and put into perspective all the financial decisions they are expected to make soon; whether it's taking out a student loan, using a credit card, or even lending money to a friend. It will also give them a set of rules they can apply and adapt to their situation. Like figuring out how much of their income they should be saving, and then investing.
Plus, it will mitigate the risk of them taking on bad debts, because they now grasp how detrimental this might be to the future they envision for themselves. It will allow them to be more discerning in their purchases, because they will now be acutely aware, both of their own money biases as well as the predatory marketing tactics used against them.
Like using a windscreen wiper in a downpour, being financially educated will prevent them from being blinded by the constant deluge of advertising messages they are subjected to, and will allow them to focus on the road ahead, which will lead them to financial security.
Unfortunately, with no real understanding of the basics of money management, it's inevitable that most Gen Z-ers get ensnared in get-rich-quick schemes, sucked into debt, and/or squander away their savings. The clarity that a financial education will afford them, is a welcome relief from the murky waters they are wading into.
2. Control: Being a young person is hard, not least because they feel that they lack control over their own life. Most important decisions in their lives are made or unfairly influenced by well-meaning adults, because, well, they just know better.
Being adept at making sound money decisions will help give them the sense of control they desperately seek. It will train them to think long-term, and see their future as a function of the decisions and actions they take now. They will feel like they have their hands on the wheel now, and they can steer their life in the direction they'd like, instead of wildly hurtling toward an uncertain future. It shows them that they don't have to succumb to the corporate rat race, for example. It presents a different way of thinking about and behaving with money.
It allows them to forge their own path, keeping their principles in mind, and working within the parameters of smart personal finance. Like perhaps taking on a lower paying job that offers valuable learning and experience, over a job that just pays a higher salary. It also opens their mind to options they might have never considered before, whether in terms of educational pathways, a career or moving abroad.
Plus, it teaches them to look for and carefully consider various options instead of settling for the first one they come upon, or more importantly, evaluate whether or not they really need it in the first place. This trait is particularly useful in today's fast-paced and instantly gratifying world. It shows them that they don't need to be slaves to the advertising marketing industry that compulsively and consistently push the impulse-buying buttons of these unsuspecting youngsters, with their carefully devised campaigns and highly-tuned algorithms.
3. Confidence: Attaining the aforementioned clarity and sense of control will naturally lead to a strong sense of confidence in these young people. They will feel more in control of their money behavior, and that makes them feel more calm and secure about their future. They don't fear "adulting" so much anymore, because they have a good understanding of how to navigate and deal with the financial quagmires that they've noticed have upended the lives of so many people they know.
This isn't a false sense of bravado- these financially educated Gen Z-ers understand the implications of impulsive, brash decisions, and realize that "simple not easy" is a recurring theme in learning about money. They recognize that while everything they've learned seems relatively simple, actually living by these principles can be quite hard, and needs a strong sense of discipline. But they also know that this sense of discipline is easier to build as youngsters, because it gets hardwired in them, and then becomes instinctive as they get older.
Understanding money thus goes from being an "unconscious incompetence" where they didn't know what they didn't know, to an "unconscious competence" where they are unaware they are using the principles of smart money management, because it's so ingrained in their behavior. This confidence, therefore, is a result of competence in the money realm. And it spills into other areas of their life as well, whether it's living alone, holding down a job, or investing regularly. It makes them wise beyond their years, because they have learned from the experiences of others, and are much better prepared to avoid financial quagmires and build a financially secure future.
Financial education is therefore is a skill that's no longer simply a nice-to-have. It's a critical-to-learn skill. Just ask the thousands of parents who are still supporting kids that are well into their forties, or those who are really worried about leaving their wealth to their kids, or those whose kids have already burned through their savings & inheritance. A solid financial education will give Gen Z-ers clarity, control, and confidence, while saving them a whole load of financial headaches, heartaches, and misery.
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