The A-Z of financially empowering Gen Z

Experts explain how to invest young people with sound money principles and behaviour

Youngsters must be able to absorb the money lessons and implement them in their everyday lives so they feel empowered to make smart financial decisions. Getty

In his book Upstream, New York Times best-selling author Dan Heath reflects on a public health parable where you and a friend are picnicking by a river and hear a shout coming from the water as a child is drowning.

Instinctively, you both jump in to save the child, but you then hear another and dive in again to the rescue, followed by another and another and so on. As you continue to rescue the drowning children, your friend wades out of the water, leaving you behind.

“Where are you going?” you ask. Your friend answers: “I’m going upstream to tackle the guy who’s throwing all these kids in the water.”

This parable exemplifies our task in teaching Gen Z how to handle money smartly and responsibly. We have to work upstream, where we can educate them about money, instil rational money behaviour and ensure that they develop a healthy mindset around it.

The problem is, as Heath says in his book, “Upstream work is hard”. It requires us to plan and prevent, rather than react and rescue.

After all, who wants to hear about stuff that didn’t happen when it’s more thrilling to hear about saving people on the brink of bankruptcy?

Upstream work, Heath says, is also “slow and maddeningly ambiguous, compared to downstream work, which is fast and tangible”.

Financially empowering Gen Z is clearly upstream work. It takes time and effort to instill sound money principles and its effects aren’t always immediately obvious and often hard to tabulate in the short term.

The need of the hour

Gen Z today spend more money than any generation before them, but grow up without any financial education whatsoever.

Earning more money without being financially educated just means spending more in the same ways they’re used to. Societies everywhere are teeming with examples of grown-ups doing this. Why should we think it will be any different with this generation?

Also, many countries have regulations in place that allow youngsters to work, but there is no correlation to these youth being more financially savvy as a result.

Simply giving them financial knowledge is ineffective. We need to consider changing their attitudes and mindset.

We need to pre-empt their resistance to change, while ensuring that they are able to absorb the lessons and implement them in their everyday lives so they feel empowered to make smart financial decisions.

Ignorance is costly

Managing money smartly isn’t something Gen Z is likely to figure out on their own. They might, but it will cost them heavily in terms of time, money and self-confidence.

This lack of confidence is the primary reason many grown-ups put off making major financial decisions, according to a research project by Principal Financial Group and behavioural economist Dan Goldstein.

It’s not the lack of money, but the lack of a right, confident mindset that being financially educated affords.

Grown-ups commonly put off saving, investing and retirement planning, for example, which has long-term detrimental effects on their financial well-being.

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Play the long game

We need to be intentional in teaching Gen Z about money. This takes time and intentional effort on everyone’s part. In a world that promotes and glorifies instant gratification, this isn’t easy, but it’s the only way that works well and for the long term.

That’s the kind of change we need for the next generation. Not fleeting and momentarily inspirational, but deep-rooted and life-changing.

Success will come, quietly but powerfully, and will reflect not only on their financial lives but in every aspect of their lives, from their relationships and career choices to their mental health and well-being. That’s how inextricably linked this issue is.

So, even though preparing the next generation to handle money well is complex, we need to commit to it.

Bringing about systemic change is always difficult, but it’s intensely worthwhile; playing the long game always is. That’s exactly why it demands our tenacity and undivided attention.

Marilyn Pinto is the founder of KFI Global