An interesting group to look at during Financial Literacy month is our next generation of leaders, Gen Z. Defined as anyone born after 1996, Gen Z is a powerful cohort that has hundreds of billions in spending power in the U.S.
According to a study by Raddon, over 80% of Gen Z individuals rely on parents and family for financial information. Due to the rapidly changing nature of the financial landscape, the advice and direction of older generations is not only becoming out-of-date, but is not applicable for the ever-evolving capabilities and possibilities of modern digital financial software and services.
Over the past year, the National Financial Educators Council asked 7,246 people across all 50 U.S. states to respond to a test measuring their current personal finance knowledge. The results were broken down into various age groups, with 70% considered a pass. 10-14 year olds averaged 57.41%, 15-18 year olds averaged 65.82%, and 19-24 year olds averaged 71.11%, pointing to a distinct lack of financial literacy for the younger generations who are entering the market.
With their significant spending power, this group is increasingly in need of digital tools and financial services to help elevate their financial literacy, and easily manage and budget their money.
Fluency in the language of digital finance
While Gen Z is the first generation born with a smartphone in hand, there is still a substantial need to improve their financial literacy skills.
According to a report by the Federal Reserve, U.S. households that scored higher on financial literacy tests were more likely to adhere to recommended financial practices, thereby increasing their economic mobility. Lower scores on financial literacy tests have shown to be a contributing factor for those who aren’t following standard recommended financial practices, decreasing economic mobility and broadening the wealth gap as a whole.
Given the evident need for financial literacy education, the financial brands that provide Gen Z with reputable and approachable financial advice and tools will be integral in helping this important generation navigate the nuances of their finances and increase their economic mobility.
Taking control of finances
Gen Zers have shown interest in taking control of their financial lives by investing time in becoming financially literate in creative and interesting ways. New digital financial tools that make managing finances approachable are driving a transformation amongst Gen-Z by lowering barriers to entry and enabling access for all.
According to recent data by Tallo, 38% of Gen Zers have received financial advice from TikTok, reporting they’re likely to turn to the platform to get advice on long and short term savings as well as budgeting tips.
In recent months, social media platforms like TikTok and Reddit have served as financial education sources via influencers and personalities in their communities. For example, #personalfinance videos are garnering billions of views on TikTok every day.
However, advice and education that can be found on these platforms does not always come from a credible source. This presents an opportunity for established financial brands to leverage these platforms to provide reliable, accessible and dependable financial advice.
Adapting to the changing needs of a new generation
From existing legacy banking institutions to cutting edge fintech startups, many brands are already capturing the attention of Gen Z. Several have managed to make inroads with adapting their services to the new needs of this generation, especially by incorporating education and simpler interfaces into their existing product and offerings.
A few financial brands tapping into Gen Z:
- Zogo is a financial education platform that offers over 300 “modules” to teach younger users how to understand financial terminology and manage their money, all from one phone app.
- JPMorgan Chase and Wells Fargo are both traditional banks that have started offering teen banking services, including Chase’s First Banking teen debit card and Wells Fargo’s two student banking account types for high schoolers and college students.
- Mobile banking platform, N26, offers easy to use and personalized sub-accounts called ‘Spaces’ which allows for instant transfers from consumers’ main account and helps users visualize, track and achieve their financial goals through a very clean and highly customizable user experience.
- Last year, the 18-19 age group was the fastest growing U.S. customer base on the N26 digital banking platform, with the number of customers aged 18-19 almost six times higher than it was at the end of 2019.
- Apps like Robinhood have enabled members of Gen Z to treat investing like the mobile games they grew up playing, and have democratized the ability to manage one’s own portfolio with transparency and ease.
Even though it’s not clear how teens will bank in the future, one thing is certain, and that is that a lot more of them are showing interest in financial education. And banks are zeroing in on that. In order to capture this burgeoning market, they and other finance-adjacent firms must devote themselves to providing education and easy ways to take direct control of their Gen Z clients’ financial futures.
By focusing on financial literacy, nurturing their existing interest in finance, and becoming a brand that younger consumers can look towards for assistance, companies can set themselves up as premier destinations for an emerging demographic that will soon assume control of the lion’s share of liquid capital.