Financial literacy for Gen Z is a matter of concern. In a space where most stakeholders would be massively thrilled just with meeting the elusive ‘financially literate’ criteria, I contend that this isn’t enough for Gen Z. Not by a long shot.
Financial literacy is typically assessed by how many questions students can correctly answer on a standardized, multiple-choice quiz. These questions evaluate their understanding of a handful of personal finance topics ranging from savings and inflation to diversification. There is nothing wrong with these tests. They accurately measure what they are meant to.
The problem arises because most people think of financial literacy as a math-based skill and assess it using math-based questions. While scoring well on these tests might tick the box as far as the general financial literacy criteria is concerned, it doesn’t do enough to prepare Gen Z to navigate the financial complexities they will face.
Financial literacy vs empowerment
Here’s where the concept of financial empowerment comes in. It’s defined more broadly and encompasses more facets than financial literacy. While financial literacy is thought of as a skill you can acquire by applying a set of formulae to the problem, financial empowerment has to do with moulding mindset, attitude and behavior as well – and these facets are arguably much more important in influencing financial decision-making.
Where many financial literacy experts tend to dumb things down to quick tips and generalized guidelines, financial empowerment experts make space for complexity, depth and nuance. Where financial literacy is usually delivered as a McProgram, identical irrespective of who it’s being delivered for, financial empowerment programs are necessarily customized to the learner.
Where financial literacy is usually a one-way conversation characterized by lectures, seminars and pre-recorded videos, financial empowerment is an engaging discussion that does far more to engender true learning and behavior change.
Financial empowerment in its truest sense shows students how to think for themselves and how to expand and modify their thinking based on their particular context.
Components of financial empowerment
Even more so than the generations before them, for Gen Z, financial decisions are intricately entwined in and impact every aspect of their lives. Everything from taking out student loans and the career they pursue, to the car they buy and their decision to start a business or a family, will require them to make far reaching financial decisions.
This necessitates weaving basic financial literacy skills with strands of intelligent investing, consumer behavior, psychology, behavioral economics and neuroscience. And that’s just for starters.
True financial empowerment also requires the inclusion of myriad elements of entrepreneurship, decision-making, social justice and positive psychology. If any of these seem surprising or out of place in a financial literacy curriculum, they shouldn’t. Each of these topics builds on the core premise of financial empowerment for Gen Z in a specific way.
Their effect then compounds to deliver even greater returns and overall benefits.
Downsides obscure the powerful upside
I’ll be the first to admit that this isn’t easy to do. It’s time consuming and more expensive. The results, aside from being impossible to assess on a standardized test, will be intangible for the most part and not immediately evident. These downsides however, pale in comparison to the powerful upside that financial empowerment affords, not just to the individuals but to society at large.
A generation that understands the importance of saving, the cost of credit, long term investing and market volatility will be less likely to be subject to, and more prepared to withstand, the vagaries of the economy.
Couple that with a deep understanding of the science of smarter and happier spending, key insights on behavioral finance, strong decision-making skills and a profound appreciation of the freedom and options that being financially independent brings and you have a generation that will be better equipped than any generation before them to thrive.
Then top this off with a keen awareness of, and empathy for social justice issues and that generation will do better not just for themselves but for humanity as a whole.
Empower or not
This transformative change in the next generation requires our generation to act decisively. However, given the current constraints in budgets, time and operational resources, it’s easy to see why most stakeholders hurriedly reach for the lower and easily attainable bar of financial literacy, rather than stretch to the higher and more difficult, though infinitely more beneficial empowerment.
We should stop for a moment and consider the ramifications of our decisions and actions on a future generation. Is going the ‘easy but ineffective’ route worth the hardship that Gen Z will have to undoubtedly have endure as a result? Will our generation have the intestinal fortitude to make the hard choice and do the difficult work so that the next generation will reap the benefits?
We need to, but judging from our lackluster performance on a variety of other important and forward-thinking initiatives, we aren’t there yet. Not by a long shot.
