Generation Z, the generation born between the mid-1990s and the mid-2010s, is now the largest generation ever, comprising almost 30 per cent of the global population. We all have a stake in their future and success.
Given the looming economic crisis, the dizzying pace of technological advancement and the rapidly shifting social norms, the success of Gen Z will be hard-fought.
Gen Z isn’t shying away from any of this and is frequently lauded for being innovative, entrepreneurial and open-minded.
However, there is one skill they lack: financial literacy.
Through no fault of their own, as it’s not part of the current education system, their ignorance of this subject risks derailing their future.
It’s a risk that needs to be addressed urgently, given the massive downside.
Teaching Gen Z how to how to budget properly is a key part of what financial literacy entails, but the benefits of financial literacy go far beyond showing them how to deftly balance their paycheque with their love of avocado toast and creamy lattes.
Financial inclusion refers to the ability of individuals to access and use financial services and products that meet their needs and are affordable.
Financial literacy plays a crucial role in helping these youngsters understand and navigate the financial system, which can seem quite daunting to the uninitiated.
With the proliferation of digital payment systems, online banking and cryptocurrency, young people face more difficulty navigating the world of finance.
This can be particularly important for those who have historically been excluded from the financial system, such as low-income individuals, women and minorities.
Financial literacy can prevent youngsters from taking on excessive debt or falling victim to predatory lending practices, which can lead to financial exclusion.
It gives Gen Z the competence and the confidence to access and use the most appropriate financial services and products like savings accounts, loans and insurance.
There has been a sharp spike in financial scams in recent times. These scams are becoming more sophisticated and difficult to detect and can take many forms, including phishing emails, phone scams, bank impersonations and fraudulent investment schemes.
Latest statistics from the UK’s Financial Conduct Authority show that there has been an increase of 193 per cent in the number of calls from investors reporting suspicious investment opportunities over the past five years.
One of the most effective ways to combat financial scams is through financial literacy.
By educating Gen Z on the warning signs of a scam and the steps they can take to protect themselves, financial literacy can help them from falling victim to these schemes.
This may include teaching them how to identify phishing emails, how to verify the legitimacy of an investment opportunity and how to protect their personal and financial information online.
With the widespread access to various financial and investment products available to anyone with a phone and internet connection, educating youngsters on the inherent dangers becomes even more critical.
The gig economy
The gig economy, also known as the sharing economy, is characterised by short-term contracts or freelance work.
It has exploded in popularity over the past decade, driven in part by technological advancements, and Gen Z is more likely to embrace the gig economy than any generation before them.
This is particularly due to the characteristics of Gen Z alluded to at the beginning of this article, namely: being innovative, entrepreneurial and open-minded.
Sixty-one per cent of Gen Z workers have freelanced in the past year, compared with 47 per cent of all workers, according to a survey by Upwork.
They revel in flexible work schedules, which enables them to balance work and other aspects of their lives; the opportunities for skill development and entrepreneurship, and in the ability to earn a steady income while exploring various career options.
There are, however, some challenges associated with the gig economy, the biggest one being the lack of financial stability that comes with irregular and unpredictable income streams.
Financial literacy, thus, becomes an essential tool for Gen Z’s success in the job market.
These youngsters must be able to properly manage their finances and plan for their future.
By understanding the fundamentals of budgeting, saving for retirement and investing, Gen Z can position themselves for long-term stability and success.
Financial literacy also has broader societal implications that are critical for Gen Z.
By empowering young people to take control of their finances, we can help reduce economic inequality and build a more sustainable society, one that is less financially fragile and more financially resilient.
This is particularly important in light of the Covid-19 pandemic, which has exacerbated existing economic disparities.
It’s time to prioritise financial literacy and give Gen Z the tools they need for success.
Marilyn Pinto is the founder of KFI Global