Financial literacy is lowest among Generation Z. However, the Generation Z cohort is focused on improving their knowledge. It is according to a new report from the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University (GW) School of Business. The report used data from the 2021 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) to compare multiple generations. This includes the Silent Generation, Baby Boomers, Generation X, Generation Y, and Generation Z. According to TIAA and GFLEC, the ability of individuals to make financial decisions throughout their lives depends, in part, on their level of financial literacy.
According to the report, individuals generally begin in adulthood with poor financial literacy. Although it accumulates over time, financial literacy remains low from generation to generation. Data from the study confirms this: Two-thirds of Gen Z were only able to correctly answer 50% or less of the questions on the P-Fin Index. In comparison, about 40% of Baby Boomers and the Silent Generation answered 50% of the index questions correctly.
While Gen Z had the lowest levels, the study found that trends in the Index’s financial well-being metrics showed Gen X had the greatest financial challenges. About 28% of Gen Xers surveyed said they struggled to make ends meet in a typical month. This is more than any other generation. About 20% of Gen Z, Millennials and Baby Boomers, and 11% of the Quiet Generation said they struggled to meet their monthly financial obligations.
Additionally, the economic uncertainty that has surfaced due to the Covid-19 pandemic has highlighted the need for Americans to improve their financial knowledge base. Indeed, 39% of those polled said they were now motivated to focus on their financial education. Gen Z, Y, and X reported feeling the most focused (52%, 48%, and 44%, respectively).
Gen Z may be slightly ahead of the game as they are more likely to have attended a financial education class or program (40%). They are also the generation most likely to have been offered a financial education course or program (48%). Generation Z adults are currently between the ages of 18 and 23, indicating that there has been an increase in the offerings of financial literacy programs in secondary and tertiary education.
It’s no secret – there is a great need for better financial literacy in America. Pension plan sponsors and committees can play a key role in offering workplace financial wellness programs to help employees manage their personal finances and stay on track. Numerous studies have shown that financial wellness programs Not only does it help them manage their money better, it also helps improve participation rates in retirement and savings plans, as well as aids in recruitment and retention. There is no denying that financial well-being is important, and as younger generations improve their focus and motivation to learn how to manage their finances better, employers should follow their example and offer value-added programs to help them do so. .
Steff C. Chalk is Executive Director of The Retirement Advisor University, a collaboration with UCLA Anderson School of Management Executive Education. Steff is also the Executive Director of Plan Sponsor University and is currently a professor at Retirement Adviser University.