Gen Z and Personal Finance: Perspectives of Someone Who Was Only Six in 2008

Alex PetersAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Many Americans believe that Gen Z is financially illiterate and uninformed. But the story is not that simple. Without proper social, historical, and economic context, it is impossible to understand Gen Z’s financial perspectives fully.

I was six in 2008. Growing up without the memory of the great financial crisis has shaped my view of the world. This sore spot in history, still fresh in the minds of adults over the age of 25, does not and cannot have the same influence on my thoughts as on others. And this is merely one unshared experience that separates Gen Z from other generations.

While members of Gen Z have much to learn, any stereotype of financial ignorance fails to capture the reality of the situation. Gen Z's financial behaviors and attitudes are shaped by an array of factors, including its experiences, economic obstacles, and evolving societal values – just like every generation before it.

A few contextual points

  1. No generation has a particularly impressive knowledge of personal finance, according to a study conducted by the TIAA Institute. Baby boomers and the silent generation scored the highest at 55% of personal finance questions answered correctly. Gen X, Y, and Z scored 49%, 48%, and 43%, respectively.
  2. The findings from the previously mentioned study show consistent deficiencies across generations in the understanding of risk and uncertainty (37% on average).
  3. The cost of buying a home has increased by 1,680% since 1970 (inflation was 644% for the same period), compared with an inflation-adjusted increase in median income of 84% since 1970 (see here and here)1. Further, the cost of goods in the U.S. has risen 67% since 2000, making it harder for younger generations to gain traction on their finances. This increase is unsustainable and has priced out older members of Gen Z looking to purchase their first home.