“We, the young, educated, ambitious, and technologically savvy generation, have the misconception that Financial Literacy, which teaches us the ABCs of personal finance management, is only for the elderly and the uneducated. In this article I argue on the contrary, explaining why financial literacy is even more critical for our generation at-risk of being sucked by the consumerism vortex and falling under the investment trap. Especially since our education system failed to teach us this extremely valuable life skill that prepares us to tackle any short-term financial pitfalls, and better position us to achieve our long-term financial goals.”

What are your financial dreams? Home ownership? Early retirement? To pay off all your debts? Travel around the world? Start a business? Like mine, these are the dreams of many of my Gen Z peers born between the late 1990s and early 2010s. And being young, educated, ambitious, and technologically savvy, it seems we are right on track to achieve our dreams. But despite carrying these hallmarks of success, our generation is missing a crucial element in order to achieve financial independence and freedom that we long for. And that is Financial Literacy.

Unless you are extremely well-off, it is only possible to achieve your financial goals if you are able to manage and multiply the money that you have made. And that’s why financial literacy is important. It empowers us with the knowledge, skills, and the attitude to successfully save money, budget wisely, and invest smartly, or in other words make wise financial decisions. All in order to better prepare us to tackle any short-term financial pitfalls, and better position us to achieve our long-term financial goals. 

But do we, educated youths, really need to learn to manage our personal finance? Isn’t financial literacy only for oldies and the uneducated? No, on the contrary financial literacy is even more important to our generation. It is because our path to financial security and independence is filled with road-blocks like none other generation. Let me explain how.

The Consumerism Vortex And the FOMO!

The culture of consumption has taken the contemporary world by storm, blurring the lines between needs and wants. It has become increasingly hard to resist this wave of consumerism when the world today views success with a materialistic lens, or by the ability of a person to purchase the finer things in life. And being the generation that wants the latest and the greatest to be the trendiest we are the most susceptible to being swept under this wave. Especially considering how popular credit cards are among our technologically savvy generation, making it possible for us to easily live beyond our means.

Facilitated by credit, consumerism has become that much irresistible for our generation due to our unmindful use of Social Networking Sites (SNS). Born practically with social media on our smartphones, we share everything about us in our digital life. Social media companies then sell our personal information to advertising companies, who use it to entice us with targeted ads for products that are specifically tailored to our wants and desires. It’s very hard to say no to these personalized products and services that appeal to our inner shoppers. Especially when they are only a click away from being delivered to our house.

But what value do our expensive lifestyle serve if we can’t even show it to the world? And what better platform to showcase this success than through social media? By accessing and measuring our ‘success’ through the gold standard of views, likes, and follows, social media has therefore glorified consumerism, making it that much alluring to our generation. The need for social validation and approval has become so strong that we don’t care that we don’t need or can’t afford most of what we have bought. After all, it’s all for the gram. 

But what we fail to realize is that by buying things we don't even need with money we don't have to please people we don't even know, we are not only gradually chipping away at our financial dreams but also putting out financial security is jeopardy. Most young people living paycheck to paycheck found this the hard way when they lost their income source to the Covid pandemic that forced many businesses to lay off employees. How I wish they were financially literate to understand the value of having an emergency fund for rainy days.

Beware of the Investment Trap & "Get Rich Quickly" Schemes.

Attaining an unsustainable consumerist lifestyle is not possible only through debt. As our future self ultimately has to pay for our credit purchase today, we know that debt is not a golden ticket to the expensive lifestyle we long for. Therefore, it has become very important for our generation to earn money, and earn it quickly. We want the good things in life and we want it now. Therefore, while we are more ambitious than generations before us, we are that much impatient too. This is why Gen Z is so attracted to financial and investment ‘gurus’ of the social media that promise to help us obtain very high returns with little investment, risk, time, and efforts. Lured by the promise of getting rich quickly, young and inexperienced investors that are financially illiterate are very prone to falling victim to these scams and losing their hard-earned money.

But even those of us with a lower risk tolerance and patience can no longer depend upon the good old savings and fixed deposits to steadily build our wealth. The high inflationary pressure will quickly erode all our life savings. This is one reason why Gen Z has increasingly turned towards the financial markets to invest their money. The other reason is the perceived link between investment and social status. But while most of us are invested in financial markets, we are not financially literate to understand it well enough. This gap in our knowledge of the financial market is getting wider as financial instruments become increasingly more complex. As we don’t really know how to invest in the financial markets, the fear of losing money holds many of us back from investing, and from attaining our financial goals. Whereas the ones that do invest actually end up actually losing both their money and their future.

Is Gen Z destined to crash?

In light of how bumpy the road towards financial independence and freedom is for Gen Z, one would expect our education system to at least teach us the ABCs of personal finance like the magic of compounding, how to budget spending, use credit cards wisely, save and invest smartly etc. After all, education is supposed to prepare us for the future. But while we are taught complex mathematical equations that have little to no bearing to our future, the valuable life skill of financial literacy is conspicuously absent from our curriculum. As a result, we see many of our youth resorting to social platforms such as Tik Tok, and Reddit to learn about personal finance knowledge and skills that our educational system neglected to teach us. The only problem is that oftentimes the ‘education’ shared on these platforms come from people that are seeking to make money off our naivety. 

But imagine if you had access to a car but were not taught how to drive it. What would happen? Sooner or later, you will crash it. Similarly, unlike before, most of our generation now has access to technologies, investment tools, financial products such as credit cards, as well as money now that we have begun earning it. But we are not taught the valuable life skill of financial literacy that teaches us how to properly utilize them to reach our financial dreams. As a result, we are now faced with the risk of crashing our finances and subsequently our life.

So, lacking financial literacy, is Generation Z doomed for failure? No. The flip-side of technology is that we don’t need the government or our schools to teach us how to manage money. We now have online financial literacy courses and financial technologies at our finger tips to educate us while also making personal financial management convenient and fun. You just have to be careful that the financial education that you get is from a credible source.

So, where do you begin? Well, financial literacy is not a rocket science. One can simply start by tracking the money flow i.e., one’s income and expenses as the first step. And there are multiple ways to do the same. Either you write the details of any money related transaction in a notebook, segregate the transactions based on their nature e.g., fixed, variable or rent, groceries, eating out etc., add up the totals and based on the available date set up your saving plan and then a budget. 

Did this sound like rocket science? In that case, there is a far simpler way. Simply sign up for Khatapana HERE and just enter your transactions whenever you pay or receive money and let Khatapana do the rest of the work for you! And make sure you enter your transactions regularly and diligently because it is easy to forget. 

Also don't forget to ask your friends and families: के तपाईको हिसाबकिताब क्लिअर छ? 

Because financial wellbeing is contagious just like your smile! So, keep smiling and promoting financial wellbeing!