This week’s article was written by JBaughman, a guest writer.
Why Gen Z Must Learn About Financial Literacy
It’s not just about headline-grabbing millennials anymore–members of Generation Z are starting to enter the workforce and become young professionals in their own spotlights. However, the majority of them are failing to prioritize their finances. Statistics from Northwestern Mutual’s Planning & Progress Study show that a stunning 57% of Gen Z doesn’t know how much they have in their savings. Why should it matter if a member of Gen Z knows anything about finances? For starters, they’re no longer just a group of kids. Gen Z accounts for those who belong to the age range of 7-22, which is the youngest age group eligible to apply for a credit card. That’s why it’s so vital for them to learn about managing their own line of credit, along with other financial options.
One day, the members of Gen Z have to think about buying a home, having kids, and getting married. These are very exciting milestones that unfortunately come with some heavy financial burdens. However, they must start as soon as possible. According to an article on investing by CNBC, Gen Z is in the perfect position to take advantage of their extended exposure in the stock market. The article highlights compound interest, which allows your savings to compound and increase earning potential. To illustrate this: “If you save $285 per month starting at 25 and earn an 8% rate of return, you’ll have about $1 million by 65. But if you wait to start until 30, you need to put away $433 per month to end up with the same amount.” Sure you may not make that much money yet, but they suggest that starting small and building a habit of putting away $10 a month is still better than spending all your hard-earned cash and having none left for the future. Maryville University puts a premium on other facets, such as business and marketing, which will help students develop a broader perspective on the subject. By covering these areas, young individuals can gain a deeper insight into how their money operates from a theoretical point of view and apply this knowledge accordingly.
A recent survey conducted by Stash found that those in Gen Z demonstrated less knowledge of financial basics compared to older generations, particularly concerning credit. For instance, Gen Zers are more likely to use credit cards to pay for things they can’t currently afford, which is quite worrying. Furthermore, only 71% of Gen Z respondents claimed that it was important to pay their balances in full each month, compared to 77 percent for all other generations, and 80% for Baby Boomers. Correspondingly, New York Daily News claims that Gen Z has the lowest credit scores across all generations, tied with millennials. Their tips on improving your credit score include not missing any payments. Note that “even one late or missed payment can have a lasting negative impact on your score, so it’s important to make sure never to miss a payment.”
To get started, CNBC suggests that young workers should form a complete picture of their finances. Look at how much you earn, any savings you already have, and any debt you owe. Next, make a plan of action to tackle any existing debt and save as much money as you can for the future. A rough suggestion for those in Gen Z is to “save 10 to 15 percent of your income for retirement while also utilizing at least 20 percent of income to pay down debts”, as featured in our previous post on ‘A Balancing Act: Pay Off Debt or Save for Retirement?’ If you still have further questions, the internet has a lot of resources for any questions you might have regarding your credit score and more tips on saving for the future.