Why bridging the financial literacy gap is crucial for Gen Z investors

The average financial literacy rate in the region is only 30.7%

Younger people began to discover the potential of digital finance as a means of building a relationship with wealth during the coronavirus pandemic. Getty

They say the future belongs to those who see possibilities before others. And there’s no better way to own the future than by harnessing the greatest of all possibilities: technology and youth.

With nearly 50 per cent of the UAE’s population between the ages of 15 and 35, the youth represents the largest demographic in the nation. This is also the largest number of young people to grow to adulthood in the country’s history.

In lieu of extraordinary technological advances, 9.7 per cent of the UAE’s gross domestic product (GDP) is already generated by the digital economy, currently estimated at $27 billion.

We also know that millennials and Generation Z are instrumental in driving the country’s growth.

We witnessed an acceleration of this trend during the coronavirus pandemic, when young people started to discover the potential of digital finance as a means of building a relationship with wealth.

But even though that is exciting, the same advances in technology that have enabled younger people to invest and trade easily also demonstrate that trading is no child’s game.

For example, the average financial literacy rate in the region is 30.7 per cent.

To reduce this knowledge gap, it is crucial that we focus on building financial literacy to ensure that people make informed decisions when participating in the world of money.

The growing need to share knowledge and expertise

We must work towards a holistic solution that prioritises new approaches to financial literacy within existing digital trading platforms to address the needs of the largely untapped pools of investors.

Such an approach would also help to address the shared responsibility with governments, education providers and stakeholders in the digital finance industry.

Getting started early on the investing journey can build real long-term wealth over time as returns compound.

When young people want to get started with investing, they look for apps that provide the functionality and resources they want without making them feel overwhelmed.

An integrated platform rich with powerful tools can build financial literacy among new traders and investors by enhancing their trading insights and abilities.

Next-generation platforms designed to fill the knowledge gap must have four main features:

• They should enable easy research and tracking and provide resources to improve users’ market understanding and empower them to make better investment decisions.
• They must use market data and financial news to keep users up-to-date and create an inclusive environment where more young people have opportunities to participate.
• Digital trading can seem intimidating at first. Hence, it is important to offer users an easy-to-manage interface with functionality and real-time data. This helps users to understand the investment experience before committing any of their money.
• They should aim to offer a personalised experience in terms of alerts, watch lists and updates.

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Digital finance platforms can play a crucial role in providing the resources needed to take the first steps towards building a culture of lifelong learning among a new generation of traders and investors.

Organisations that are successful in closing the knowledge gap in digital finance will be able to harness new and emerging user demographies to reach higher levels of efficiency, expand into new markets and offer personalised trading and investment solutions for a global consumer base composed increasingly of digital natives.

This is crucial in the UAE, where more than 99 per cent of the population are internet users and where people spend an average of three hours and four minutes each day on social media.

Muhammad Rasoul is the chief executive of neo-broker amana.