Is Gen Z Financially Illiterate? 3 Money Skills Gen Z Needs Now
Written by
Laura Bogart
Edited by
Kristen Mae
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To put a fresh spin on an old saying, the kids might not be all right — at least when it comes to personal finance. A slew of new studies indicate that members of Gen Z are lagging behind previous generations in reaching key financial milestones or even having a clear sense of what it takes to be financially successful.
One headline-sparking study from Empower found that Zoomers believe they need to earn at least $600,000 a year to be financially successful. Even accounting for the real and significant burden of student loan debt, that is a gob-smackingly rare salary, especially for people fresh out of college.
The Better Money Habits team at Bank of America has been tracking Zoomers’ money management, and their 2024 report reveals that Gen Z continues to experience financial stress and limitations. Of particular concern, one in four respondents said that the high cost of housing was a barrier to financial success, while more than half reported they didn’t pay for their own housing.
So, what’s a Zoomer to do? If they want to get ahead of their personal finances, they’ll need to develop these essential money skills now.
Gaining Financial Literacy
One of the first steps Gen Z can take toward financial independence is learning the essentials of personal finance. However, reporting from EverFi shows that an overwhelming number of teens and young adults still turn to their parents for money advice. Given that their parents likely came of age in an entirely different financial era, when housing was more affordable and a cup of coffee cost less than a dollar, Zoomers may not be getting the best, most relevant guidance.
The EverFi report also suggests that the rise of digital banking, coupled with a decline in personalized financial support from employers, has left Gen Z largely on their own when managing retirement benefits, 401(k) plans, or pensions (assuming a Zoomer could even find a job with a pension these days). In a digital age where everything happens seemingly in an instant, Zoomers must develop a baseline knowledge to confidently make quick decisions.
Building Emergency Savings
The Better Money Habits report revealed some dire statistics about Gen Z’s saving habits. Almost a third of respondents said they wanted to save more but didn’t have enough money to do so. Even more concerning, 57% said they didn’t have enough emergency savings to cover even three months of expenses — an increase from 56% in 2023. Meanwhile, only 18% reported contributing to an emergency fund, up slightly from 13% in 2023.
Having an emergency fund with three to six months’ worth of expenses is a cornerstone of financial security for good reason. To succeed, Zoomers need to do more than just earn money; they must learn how to save it.
Understanding how to create an emergency savings fund can also acquaint Gen Z with banking products they might not be familiar with. For example, many people grow up knowing about checking and savings accounts, but they might not realize that a high-yield savings account can earn interest on the money they put in it, making it a smart place to keep emergency savings.
Improving Credit
To be fair, Gen Z is coming of age in a time of high inflation and rising costs, increasing the temptation to rely on credit cards to cover everyday expenses. However, greater credit card usage often leads to not-so-great levels of credit card debt.
The Federal Reserve Bank of New York’s Center for Microeconomic Data reports that credit card debt is rising, with Gen Z more likely than other generations to max out their balances. While the increased cost of living is a factor, some of this debt can be attributed to financial impulsivity — particularly Gen Z’s tendency to prioritize experiences and chase social media trends.
Learning how to build a budget and resist spending temptations (even if that means deleting certain apps) is a great first step toward improving credit. Zoomers may also need to cultivate a stronger understanding of how their credit score can impact major financial decisions, such as leasing an apartment or buying a car. Prioritizing debt repayment will be essential for Zoomers to regain their financial footing.
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