Financial Literacy is Low Among Workers

Financial literacy is lowest among Generation Z.  However, the Generation Z cohort is focused on improving their knowledge. That’s according to a new report from the TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University (GW) School of Business.  The report used data from the 2021 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) to compare across many Generations.  This includes the Silent Generation, the Baby Boomer Generation, Gen X, Gen Y, and Gen Z.  According to TIAA and GFLEC, individuals’ ability to navigate financial decisions throughout their lifetime depends, in part, on their literacy-level around finance.

According to the report, individuals typically begin adulthood with low financial literacy.  While it builds over time, financial literacy remains low across all the generations.  The study data supported this:  Two-thirds of Gen Z could answer only 50% or less of the P-Fin Index questions correctly.  Comparatively, around 40% of Baby Boomers and the Silent Generation correctly answered no more than 50% of the index questions.

While Gen Z had the lowest levels, the study found that trends across the index’s financial wellness indicators showed that Gen X has the biggest financial challenges.  Approximately 28% of Gen Xers surveyed said they have difficulty making ends meet in a typical month.  That’s more than any other generation.  Around 20% of Gen Z, Gen Y, and Baby Boomers, and 11% of the Silent Generation said they had trouble meeting their monthly financial obligations.

In addition, the economic uncertainty that surfaced due to the Covid-19 pandemic has illuminated  the need for Americans to improve their financial knowledge-base.  Indeed, 39% of survey respondents said they are now motivated to focus on their financial education.  Gen Z, Gen Y, and Gen X reported feeling the most focused (52%, 48%, and 44%, respectively).

Gen Z might have a slight head start, as they are most likely to have participated in a financial education class or program (40%).  They are also the generation most likely to have been offered a financial education class or program (48%).  Gen Z adults are currently age 18-23, indicating that there has been an increase in financial literacy program offerings in secondary and higher education.

It’s no secret – there is great need for better financial literacy in America.  Retirement plan sponsors and committees can play a key role by offering financial wellness programs in the workplace to help employees get and stay on track with their personal finances.  Numerous studies have shown that financial wellness programs not only help make them better stewards of their money, it also helps improve retirement plan participation and savings rates, as well as aids in recruiting and retention.  There is no denying financial wellness is important, and as younger generations enhance their focus and motivation to learn how to better manage their finances, employers should follow their lead and deliver value-added programs to help them do so.


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