Financial literacy is a crucial skill set for all generations, but especially Gen Z, who are now coming of age. A strong financial education not only equips teens with the tools to handle their lives but also helps them avoid financial pitfalls and build a stable financial future.
Related: Teaching teens about money management
Is Generation Z financially literate?
According to a new report from the Money and Pensions Service (MaPS), less than half of UK children have been taught about money management at school. With just 47% of children receiving a meaningful financial education, MaPS is now estimating that 5.4 million Gen Z will not have the money skills they need for adulthood.
Yet, we know that learning about money helps children to feel more confident in managing and talking about money. Children who have a financial education not only save more regularly but tend to earn more across their lives and save higher amounts for retirement.
Our research, conducted in partnership with Censuswide and Development Economics, found that 77% of adults earning £55,001-£65,000 per year received financial education as a child, while almost half (46%) of those who didn’t are earning £15,000 or less per year, which is less than half of the national average income.
Reasons why financial literacy is important for Gen Z
Being able to manage their money
Three in four (75%) of adults in the UK say that they received either inadequate or non-existent financial education at school, and over two-thirds (69%) believe that better financial education would help them manage their money better. With 40% of adults saying they’ve felt stressed trying to make financial decisions in the past two years and 42% wanting extra guidance and advice on their finances, Gen Z needs help now to build their financial confidence.
Being able to save
The Financial Capability Survey found that 21% of adults rarely or never save, 22% have less than £100 in savings, and 61% of adults don’t focus on the long-term when it comes to money. Yet, a fifth (20%) of those who received financial education as a child say it would take them a short amount of time as an adult to save up to £20,000 for a big expenditure such as a wedding, car or a trip abroad. 49% could last three months or more without borrowing if they lose their main source of income, and 53% have a plan for financial goals for the next five years.
Staying out of debt
A survey commissioned by the Centre for Social Justice (CSJ) and the debt collection agency Lowell found that 68% of young people in the U.K. reported that a lack of money management skills is a key factor in driving them into debt. The number of British 16-24-year-olds seeking help to manage their debt has increased by over 200%, with young people reaching out to the Financial Ombudsman Service for help with loans, overdrafts, and credit card debt.
Understanding financial terms and concepts
Gen Z can’t make informed choices on financial products like mortgages, loans and investments if they don’t understand interest rates, fees, compound interest, opportunity cost and more. Understanding these terms will equip them to navigate the complexities of banking products, investment options, and emerging financial technologies. Strong financial literacy around personal finance also plays a role in career planning, including negotiating salaries and understanding employee benefits.
Navigating their student loans and debt
As Gen Z approach university education, they need to understand their student loans and debts and how repayment works. research by the National Student Money Service (NSMS) estimates an approximate total cost of £61,000 for students in England for the entire degree. This is based on average tuition costs of £9,250 per year and an average annual cost of living of £11,088. Financial literacy equips them with the knowledge to understand loan terms, repayment options, and the long-term implications of student debt.
Helping to improve the economy
Our own research conducted in partnership with Censuswide and Development Economics also shows that prioritising financial education will benefit the economy, adding an extra £6.98 billion into the UK economy each year, adding up to £202 billion by 2050. If all adults had the opportunity to receive financial education when they were school age, this could amount to an additional 76,400 businesses being formed each year – creating 123,000 direct jobs and reducing unemployment by 8%.
How to improve financial literacy in Gen Z
- Have regular conversations about money
Talk about money at home and normalise concepts such as saving and budgeting. Widen conversations to include everything from salaries to the economy and more so your children know they can ask you anything about finances and money management.
- Start early
Introduce basic financial concepts from a young age. Teach them about the value of money, different denominations, and the concept of saving. Research from The Money Advice Service also shows that by the age of seven, most children have grasped how to recognise the value of money and to count it out; and by this age, they will also understand that money can be exchanged for goods, as well as what it means to earn money.
- Use real-life examples
Relate all financial concepts to everyday situations. For example, when shopping, discuss budgeting and the difference between needs and wants.
Related: Explaining needs vs wants
- Provide pocket money
Giving children pocket money and helping them create a budget is a practical way to teach money management. Encourage them to allocate money for spending and saving.
Related: How much pocket money?
- Set savings goals
Whether it's saving for a toy, game, or special outing, this teaches them the value of delayed gratification and goal-oriented saving.
Related: How to save money as a teen
- Teach budgeting
Introduce the concept of budgeting via budgeting apps, helping children plan how to spend their money.
Related: Budgeting for teens
- Play financial games
Utilise board games and online resources designed to teach financial concepts through play. Games like Monopoly, The Game of Life, or financial literacy apps can make learning about money enjoyable.
Related: Money management activities for teens
How can GoHenry help
GoHenry's mission is to make every kid smart with money. The card and app are packed with great features that help teens safely and securely learn about money, from saving to smart spending. In-app Money Missions make learning about money fun and engaging with videos and quizzes covering everything from saving to budgeting. Parents can set flexible parental controls in the GoHenry app, and receive real-time spending alerts whenever their teens use their GoHenry teen prepaid debit card. You can also create savings goals and recurring pocket money payments.
Related articles:
Financial education could double your child’s earning power
Activities to teach your kids financial literacy
Financial literacy resources for children
Money and finance books for teens
