We live in challenging times when it comes to money and finances. Not only do 71% of kids worry about the cost of living and the impact of energy and food prices on their families, but money anxiety is on the rise, predominantly affecting Gen Z.
While GoHenry data shows Gen Z amassed £168 million last year and earned over £274 million, with an average weekly pocket money of £8.35 per child, many kids are opening up about experiencing “money dysmorphia”, a sense of insecurity and anxiety about their finances, and future prospects.
According to a recent Credit Karma study, 43% of Gen Z report having a distorted view of their financial health - an issue that can lead to poor financial decisions and neglected money management. If you spot money anxiety in your child or teen, here’s what you need to know.
What is money anxiety?
Money anxiety, also known as financial anxiety or financial stress, is a fear of dealing with money and intense worries about not having enough money for future needs. It can be caused by many things, including:
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Economic instability
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Lack of financial education
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Media pressure
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Increased economic responsibility
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Family history
Money anxiety can impact your ability to make confident financial decisions and enjoy life. Signs can include:
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Fear of spending
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Overspending
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Fear around financial products
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Bad money management
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Impulse spending
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Letting others deal with money for you
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Making poor financial decisions
Why is Gen Z susceptible to money anxiety?
We all worry about money, but Gen Z's challenges are real. Housing is more expensive, university loans are more significant, and car insurance payments are higher. Still, despite the narrative that this generation will never own a house or be able to live the way their parents have, the reality is somewhat different.
Our data reveals that GoHenry kids and teens are saving 145% more than they did last year, while more than a third (35%) of young people are already planning to save to buy a house, with 65% of those who are already saving putting away up to £1,500 for this purpose*.
Yet, constant media and social media attention to money, spending, and the cost of living are fuelling this generation’s anxiety about finances in a way no other generation has faced. Adding to this are social media posts featuring Gen Z influencers showing off luxury consumer goods, flying first class to expensive destinations, and displaying an array of designer goods that are out of reach to most of us, never mind our teens.
Effects of money anxiety on financial behaviour
The link between money and mental health has long been recognised, with a poll from the Mental Health Foundation finding that one in ten (10%) people feel hopeless about their financial circumstances, and more than one-third (34%) feel anxious, but this doesn’t have to include your kids.
Financial Coach Simone Gnessen, founder of Wise Monkey Financial Coaching, says, “Everyone needs to understand how money is tied to our emotions and behaviours. Many of us have internalised the belief that financial struggles reflect failure, so we avoid seeking help or voicing our anxieties and talking about it, making it even harder to change our behaviour and mindset.”
Kids need to know that keeping their anxieties about money quiet can then lead to behaviours such as ‘doom spending’. According to data from Credit Karma, 35% of Gen Z doom spend and indulge in emotional impulse buys to self-soothe and feel better about money stressors. Other behaviours linked to money anxiety include avoiding financial tasks, ruminating over hypothetical financial problems and paralysis over financial management.
What to do about money anxiety
The good news is research shows that a good financial education reduces money anxiety and helps kids manage their money for life. The findings also demonstrate that improving financial behaviours increases financial happiness and lowers anxiety.
Another study published by the Money Advice Service highlights the power parents have to shape their children's money habits. So, don’t underestimate how our good money habits affect how our children handle money.
How we save, spend, shop, react to a financial emergency, or discuss money are the cues kids pick up – and will lay the foundation for their attitude toward money. Our latest Youth Economy Report on Gen Alpha shows this in action. Over the last year, GoHenry Gen Alpha kids earned £193 million, a 52% increase from the previous year, spent £92 million, and have stashed away £20.5 million in savings, a 36% overall increase compared to the previous year). So it’s no surprise then that Gen Alpha parents say that, on average, their kids are so good with money that over a quarter (26%) of household spending is influenced by them, with 15% of parents saying their kids influence between 41-60% of the household budget*establishing them as the new family finfluencers.
Louise Hill, Co-founder and CEO of GoHenry, advises, “All kids and teens need to understand how money and spending is linked to their self-esteem. You can’t buy a lifestyle and won’t feel better about the future by spending too much. Instead, teaching kids that a strong financial future is within their reach by helping them become financially literate will give them the confidence to save for a range of goals, say no to peer pressure, and find better ways to cope when they feel down.”
8 ways to help your child with money anxiety
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Talk to your child about personal finance. Fear and anxiety often stem from assumptions and a lack of understanding of the accurate picture. Help alleviate their concerns.
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To ease their anxiety, help them understand how money works. Teach them about financial concepts like saving, investing, compound interest, and credit. Focus on saving, living within one's means, and delaying gratification.
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Encourage setting short-term and long-term financial goals around saving to show them how to build towards their goals.
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Advocate for mindful spending habits, such as distinguishing between needs and wants and social media trends, such as loud budgeting.
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Create a budget together and show them smart money habits around spending and how you keep to your means.
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Give them weekly pocket money. It doesn’t matter how much, but learning to handle and manage money is integral to money confidence.
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Suggest they focus on what they can control now with their money rather than worrying about the future.
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Limit comparisons to others: social media can increase anxiety by making it seem like everyone is better off financially. Talk about how what people show online isn’t always the accurate picture.
