April 15, 2024
Financial Literacy For Gen Z: Mastering Money Management

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Gen Z is worried about money. According to a recent survey, less than a third of those who make up the Gen Z demographic feel financially secure. More than half say they are “very” or “extremely” worried about failing to meet their financial needs.

“There’s no hiding that some parts of the economic landscape are tougher for Gen Z than they were for generations that came before,” says Asim Hafeez, an early growth and real estate investor, and GP/LP in over 60 companies. “But the other side of the coin is Gen Z has some unique opportunities earlier generations didn’t have, especially when it comes to opportunities for generating income.”


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Financial literacy is the first step toward financial freedom

Hafeez and many other financial experts point to improved financial literacy as one factor that can help Gen Z overcome financial anxiety. According to some studies, a lack of financial literacy is one of the key hurdles Gen Z faces when it comes to effective money management.

“Economic uncertainty has led Gen Z to face financial literacy gaps and a lack of investing knowledge, which can negatively affect their near and long-term financial well-being,” says Amanda Webster, COO of Fund&Grow.

Webster encourages Gen Z to take steps to improve its financial literacy, prioritizing budgeting and understanding how credit can affect financial empowerment. “If you can master knowing where your money is coming from and going, along with how to build a strong credit profile right in the beginning, you’ll be in a great place to be financially healthy for the rest of your life,” she says.

Financial planning, which includes goal setting and careful monitoring of financial activity, is another key component of financial literacy.

“Setting clear financial goals — whether short-term goals like buying a car or long-term goals like funding your retirement — can help you stay motivated and focused on your financial journey,” explains Alex Fedotoff, Founder of eCommerce Scaling Secrets. “Gen Z should develop a financial plan that takes into account their income, expenses, savings goals, and investment strategies. A well-structured plan can guide their financial decisions and help them achieve their objectives.”

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Understanding debt is a critical component of financial literacy

Gen Z debt has skyrocketed over the past two years, with some reporting that its overall debt load has tripled. Dutch Mendenhall, Wall Street Journal bestselling author of “Money Shackles,” says debt management is critical for anyone who wants to experience financial freedom.

“It’s critical for those who want to thrive financially to understand the different types of debt, like student loans or credit card debt, and what it takes to manage them responsibly,” Mendenhall advises. “Learn how to leverage debt to invest in yourself or your investments while resisting the temptation to use it frivolously. Your ultimate goal should be to break free from financial constraints and achieve true financial freedom.”

Kelcee Blue, a Director at Embarc Advisors who oversees projects in CFO Advisory and Financial Planning and Analysis, warns Gen Z that credit card debt should be handled carefully. “Credit cards are a great tool and can help build credit history and earn rewards,” she says, “but the compounding interest they bring to the mix can bite you if you aren’t careful. Make sure you understand how interest on credit cards work before taking on that kind of debt.”

Student loan debt is also part of the equation for Gen Z. Recent reports show that more than 25 percent of Gen Z carries some degree of student loan debt, with the average amount standing just below $25K.

“My advice for those considering taking on college loans is to attend a community college for your first two years and live with your parents during that time,” says Lance Geda, a Director at Embarc Advisors who oversees Strategic Finance and Financial Planning & Analysis. “Tuition at a community college is typically a third less than at a four-year in-state college, and living with your parents eliminates the room and board component. Saving those two years of loans and interest makes a huge difference.”

Acknowledging the need for higher earning

Low earning potential is another factor driving Gen Z’s financial anxiety. Some reports show Gen Z is earning 10 percent less than their parents, which makes financial planning and debt avoidance more challenging. According to Go Banking Rates, members of Gen Z make between $30 and $45 thousand a year — an amount exceeded by normal living expenses.

However, despite all of the challenges Gen Z is facing, it has time on its side. As any financial expert will tell you, starting early with sound financial practices can make all the difference.

“Financial experts emphasize the importance of starting early in life,” says Fedotoff. “The sooner you start growing your financial literacy, building a strong foundation, and working toward your goals, the higher the likelihood that you will achieve your financial goals.”

This post was authored by an external contributor and does not represent Benzinga’s opinions and has not been edited for content. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice. Benzinga does not make any recommendation to buy or sell any security or any representation about the financial condition of any company.

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