Gen Z, the generation born between the mid-1990s and the early 2010s, is becoming increasingly aware of the importance of financial literacy and developing smart money habits. In fact, financial literacy ranks as a top priority for Gen Z across the globe.
Despite their enthusiasm for learning about personal finance, many Gen Zers still lack adequate financial literacy, and they’re also experiencing financial anxieties amidst an uncertain economy, rising inflation and cost of living. They may not understand basic financial concepts like credit scores, taxes, or investment strategies. As a result, they may make poor financial decisions that could impact their long-term financial wellbeing.
Financial literacy is a significant problem that spans across all demographics. According to a Credit Karma survey, financial literacy is a problem that affects many people, regardless of age or background. This problem is compounded by the fact that banks have not taken the time to better understand the needs of their customers, especially those in younger demographics.
Unlike previous generations, however, Gen Z has grown up in a digital world, and technology plays a significant role in their financial lives. They are more likely to use mobile banking apps, digital wallets, and online investment platforms than traditional banking methods. Gen Z's desire to be financially literate is unique to their demographic.
However, the problem is that they don't identify with traditional banks, and banks have not taken the time to better understand them. As digital natives, Gen Zers look for digital, personal solutions that are unique to their personal situations. Gen Z seeks financial information on platforms like TikTok, YouTube and Instagram, showing that they want to learn about finance in new and innovative ways. Unfortunately, banks have little or no presence on the platforms that Gen Zers most frequently use.
Innovative Strategies to Improve Financial Literacy and Money Habits
Financial institutions should be using social media platforms like Instagram and TikTok, those that Gen Z are already using, to create educational content that is engaging and interactive and provide financial education that is tailored to Gen Z needs and preferences. These platforms can also be used to promote financial planning services and products that are designed specifically for Gen Z. To attract and retain Gen Zers, service providers will need to develop products that offer value, and are authentic and educational.
Financial institutions can also offer savings and investment products that are easy to understand and accessible to all. Many people are intimidated by traditional investment products like stocks and bonds and may not understand how they work. Financial institutions can develop simplified products like mutual funds and index funds that are easy to understand and have lower fees. They can also offer high-yield savings accounts that encourage people to save by offering higher interest rates. Looking ahead, it's likely that the banking system will dramatically change in the future. Non-bank brands like Apple and Google are already offering financial solutions that are simple, easy to understand, and bring value. These companies have a deep understanding of their customers and provide personalized solutions that meet their unique needs. As such, it's essential for traditional banks to start innovating and adapting to better serve their customers. Otherwise, they risk becoming irrelevant in a rapidly changing financial landscape.
Financial institutions can also make financial products more accessible to Gen Z by using digital tools and technology. For example, they can offer mobile banking apps that make it easy for Gen Z members to manage their finances on the go. They can also offer robo-advisors, which use artificial intelligence to provide personalized investment advice and portfolio management services.
Moreover, banks offer very few services that Gen Z values. Many Gen Zers make money in unique ways and are non-W2 earners, so having access to their money, real-time payments, and financial solutions for creators while they wait to get paid through invoicing is essential. It's not just Gen Z that banks are failing to understand. Many people over 60 have no savings for retirement, and banks have not provided suitable solutions to help them with their financial planning.
Gen Z is a generation that is highly interested in financial literacy and developing smart money habits. However, many Gen Zers still lack adequate financial knowledge. Financial institutions can address this issue by providing tailored financial education, offering financial products that align with Gen Z values, and using digital tools and technology to make financial products more accessible. By doing so, they can help Gen Z members achieve their long-term financial goals and improve their overall financial health.
David Donovan, Head of Financial Services, North America at Publicis Sapient
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