Generation Z, born after 1995, is the first generation to grow up with computers, smartphones, and the Internet. While Millennials have been the focus for some time, the oldest members of Gen Z are now reaching college age. Understanding their approach to money and their financial literacy is essential for banks that want to connect with Gen Z as they grow older.
The financial crises, including the recession and the housing bubble burst, have shaped Gen Z’s financial habits and literacy. A study by Raddon revealed that two-thirds of 2,500 teens had already opened a bank account and were three times more likely to have taken a financial education class than Millennials. Despite their financial savvy, many Gen Z individuals face stress related to saving for college, finding a job, renting an apartment, buying a home, and paying off student debt.
4 Key Insights into Gen Z Financial Literacy and Habits
1. Money Management Skills
While many Gen Z individuals are concerned about financial literacy, 84% still rely on their parents and family for financial information. This reliance is problematic since parents often have outdated or less sophisticated knowledge about savings, retirement, mortgages, and loans. Recent trends towards self-service, automation, and the constant availability of digital banking have significantly changed the financial landscape, even compared to ten years ago. Many banks no longer provide in-depth support for pension investments and 401(k) management, leaving Gen Z to make more financial decisions independently. Basic financial literacy programs on money management, investing, mortgages, and renting will provide Gen Z with a solid foundation for making crucial financial decisions.
2. Debt Aversion
Growing up watching Millennials struggle with student loans and debt has made Gen Z wary of incurring debt. While being cautious about debt is good, it’s also important for Gen Z to understand how to build credit and manage small, manageable debts to qualify for larger loans and mortgages in the future. Financial literacy programs should teach smart debt management and credit building. Understanding credit history and how to manage debt can help Gen Z make informed financial decisions. For instance, a study by TransUnion found that 46-56% of high school students don’t understand what factors into a credit report or credit history. Providing comprehensive training on credit reports and scoring is crucial.
3. Self-Sufficient Money Management
As digital natives, Gen Z is accustomed to using apps and calculators for almost everything. While this independence is beneficial, it’s also important to seek personalized financial advice. Educating Gen Z on the benefits of professional financial assistance can help them make better decisions about loans, bank accounts, and other financial services. This knowledge will help them discern when self-service is sufficient and when to seek expert help.
4. Developing a Gen Z Financial Literacy Program
Generation Z spans from young children to college students, each requiring different levels of support. Connecting with them early, ideally in high school or sooner, can build a strong foundation for financial literacy. For example, budgeting skills are essential for managing money during college and financial independence. Financial education should cover:
– Day-to-day budgeting
– Understanding credit and credit history
– Saving and planning for college debt
– Job searching and money management
– Renting and buying a home
– Mortgages
– Investing in large purchases
– Responsible credit habits, like paying bills on time
Why Gen Z Financial Literacy Programs are Important
Generation Z is poised to become the largest generation with more buying power than Millennials and Baby Boomers combined within a decade. However, with limited financial information and rapidly changing financial rules, Gen Z needs to learn more than any previous generation. Providing financial literacy through digital courses or school programs will help your bank connect with Gen Z when they need it most, just before they take on financial responsibility.
It’s crucial to keep these programs relevant, focusing on short and mid-term financial concerns like saving for college, budgeting, managing credit cards, renting, and potentially buying a home. While long-term goals like saving for retirement or investing may not be a primary concern for Gen Z, introducing these concepts is still valuable.
Connecting with Generation Z through financial literacy programs offers your bank an opportunity to build lasting relationships with the next generation of consumers.
