Solid personal finances are particularly crucial to maintaining an excellent quality of life. Personal finances determine a significant proportion of our lives, from our ability to cover daily expenses to our long-term sustainability. This is why it’s vital to have a good grasp of navigating personal finances early.
The current generation has displayed a significantly different financial approach from previous generations. For example, a recent survey found that the current generation is more poised to become financially literate due to the wealth of information available online. The survey also found that the current generation is particularly cautious about money management due to watching other generations struggle with financial problems.
However, while these findings ordinarily suggest that the current generation is at the peak of preparedness for money management, this might not necessarily be the case. A study found that while the current generation is more likely to invest and seek out financial opportunities, there is a generally low level of financial literacy.
Gen Zers had the lowest confidence in their financial knowledge of all the respondents evaluated in the study, while millennials had the highest. This low financial literacy indicates that while the current generation is more proactive about financial wellness, they still do not have a good grasp on navigating personal finances.
According to Forbes, about half of the current generation live with daily financial anxiety. Here are some of the money management challenges faced by the current generation.
1. Maintaining a Cost-effective Funding Lifestyle
The current generation has the most materialistic lifestyle. According to Fortune, Gen Zers have the highest desire to purchase easily affordable material goods. The current generation is also more inclined to shop regularly. The effect of these spending habits is significant, particularly with relatively low-income bases.
The current generation finds it increasingly difficult to set funds aside from their income. The global economic climate has also put further pressure on their saving patterns. For instance, a recent study found that US inflation has significantly impacted the saving capabilities of over 73 percent of Gen Zers.
The research also found that more Gen Zers are seeking out ways to get additional income. These trends have affected their ability to save and secure their financial future. Gen Zers are the most materialistic of all generations, so they must navigate their increasing expenses while saving for future financial milestones amid unfavorable economic conditions.
3. Financial Literacy
While financial literacy is the crux of proper money management, a significant proportion of the current generation do not have an above-average level of financial knowledge. As earlier stated, Gen Zers have the lowest financial literacy level of all generations, despite the increasing availability of financial information.
The ripple effect of this low level of financial knowledge is that many Gen Zers may be at a loss in managing their finances and making investments that offer favorable risk-adjusted returns. For instance, Gen Zers generally know that investments are critical to a secure financial future. In fact, about a quarter of Gen Zers currently own stocks.
Studies have shown that Gen Zers have a mixed attitude to debt. A significant proportion of Gen Zers view debt as a sign of trouble. Due to this perspective, many Gen Zers are particularly averse to loans even if they can manage the debt.
However, while this financial awareness exists, most Gen Zers are ignorant about managing investment risks. This situation makes them more susceptible to investment losses. Thus, it’s essential to provide financial literacy programs specifically directed at improving the financial approach of the current generation.
4. Attitude to Debt
This financial approach is not necessarily beneficial, as the unwillingness to take loans may impact their ability to build a good credit score. These impacts are even more significant for Gen Zers seeking to take out mortgages at some point.
On the other hand, there are Gen Zers who struggle with debt. For instance, Gen Zers had one of the highest overall debt growth in 2020 alone. Older Gen Zers also have a higher proportion of student debt than millennials. These high student debt levels lead the current generation to postpone or ultimately cancel crucial financial decisions.
More importantly, Gen Zers struggling with debt have found it increasingly difficult to maintain good credit scores. This has impacted their ability to get further loans. However, there are alternative agencies that provide flexible personal loans suitable for people struggling to maintain good credit scores. For instance, you can apply for CreditNinja.com loans even if you have bad credit.
Ultimately, there’s a vital need for the current generation to cultivate an appropriate approach to personal finances. Strong personal finances will be crucial to survival as global economies continue to experience declines and recessions.