Financial literacy for Gen Z is good, but what about empowerment?

Gen Z’s financial literacy is a concern. In a space where most stakeholders would be extremely happy to meet the elusive “financial literacy” criteria, I argue that this is not enough for Gen Z. Not by a long shot.

Financial literacy is typically assessed by the number of questions students can answer correctly in a standardized multiple-choice quiz. These questions test their understanding of a handful of personal finance topics ranging from savings and inflation to diversification. There is nothing wrong with these tests. They measure precisely what they are intended for.

The problem arises because most people think of financial literacy as a mathematical skill and assess it using mathematical questions. While scoring well on these tests might tick the box when it comes to general financial literacy criteria, it’s not enough to prepare Gen Z to navigate the financial complexities they will face.

Financial Literacy vs Empowerment

This is where the concept of financial empowerment comes in. It is defined more broadly and encompasses more facets than financial literacy. While financial literacy is seen as a skill you can acquire by applying a set of formulas to the problem, financial empowerment is also related to how to shape mindset, attitude and behavior – and these facets are arguably much more important in influencing the financial decision – making.

Where many financial literacy experts tend to reduce things to quick tips and general guidelines, financial empowerment experts embrace complexity, depth and nuance. Where financial literacy is usually delivered in the form of a McProgram, identical regardless of the recipient, financial empowerment programs are necessarily tailored to the learner.

While financial literacy is typically a one-way conversation characterized by lectures, seminars, and pre-recorded videos, financial empowerment is an engaging discussion that does much more to engender real 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 according to their particular context.

Components of Financial Empowerment

Even more so than previous generations, for Gen Z, financial decisions are intertwined 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 big financial decisions.

This requires weaving basic financial literacy skills with strands of smart investing, consumer behavior, psychology, behavioral economics, and neuroscience. And that’s just to start.

True financial empowerment also requires the inclusion of a myriad of elements of entrepreneurship, decision-making, social justice, and positive psychology. If any of them seem surprising or out of place in a financial literacy program, they shouldn’t be. Each of these topics builds on the core principle of financial empowerment for Gen Z in a specific way.

Their effect then combines to provide even greater returns and overall benefits.

The disadvantages hide the powerful advantage

I’ll be the first to admit that it’s not easy to do. It takes time and costs more. The results, in addition to being impossible to assess on a standardized test, will mostly be intangible and not immediately obvious. However, these disadvantages pale in comparison to the powerful benefit that financial empowerment offers, not just to individuals but to society as a whole.

A generation that understands the importance of savings, the cost of credit, long-term investing and market volatility will be less likely to be subject to the ups and downs of the economy and better prepared to deal with them.

Add to that a deep understanding of the science of smarter, happier spending, key behavioral finance insights, strong decision-making skills, and a deep appreciation for the freedom and options that independence brings. financial and you have a generation that will be better equipped than any generation before them to prosper.

Then add to that a keen awareness and empathy for social justice issues and this generation will be better off not just for themselves, but for humanity as a whole.

Enable or not

This transformative change in the next generation requires our generation to act decisively. However, given the current constraints on budgets, time and operational resources, it is easy to see why most stakeholders are rushing to reach the low and easily accessible bar of financial literacy, rather than to stretching towards higher and more difficult empowerment, though infinitely more beneficial.

We should pause for a moment and consider the ramifications of our decisions and actions on a future generation. Is the “easy but inefficient” route worth the hardships Gen Z will no doubt have to endure as a result? Will our generation have the courage to make the hard choice and do the hard work so that the next generation will reap the benefits?

We have to, but judging by our lackluster performance in a variety of other important and forward-thinking initiatives, we’re not there yet. Not by far.

Sarah J. Greer