How financially literate is Gen Z? An interview with Tomorrow

What similarities and differences are there between Generation Z and other generations in their handling of, attitude towards and knowledge of their own finances? This question prompted us to talk to Maria Mondry, Head of Banking at Tomorrow, about the topic of financial literacy. Tomorrow, a sustainable banking provider from Hamburg, conducted a survey on the financial behavior of Generation Z in cooperation with the market research company Appinio in February.

The FinTech company defines Gen Z as all respondents who were between 16 and 27 years old at the time of the survey. 1,000 people (201 people from Gen Z, 799 people over the age of 27) were surveyed between February 13 and 14, 2024.

In our interview, we take a look at the results of the survey and present the conclusions Tomorrow has drawn from them.

Financial literacy: status quo & study findings

Maria Mondry, Head of Banking at Tomorrow
Maria Mondry, Head of Banking at Tomorrow

Maria, what prompted you to conduct this study?

At Tomorrow, we have been grappling with the financial literacy of our (potential) customers since our foundation in 2018. For instance, we have already conducted several surveys with our target group in recent years. The objective: understanding what their needs are and how we can support them with our product. This made us realize that there are no current and representative studies relating to the status quo of financial literacy. When we presented the topic to Appinio, they were immediately enthusiastic, too, and recognized the potential.

Why did you focus on the Gen Z target group?

Generation Z is growing up in a time characterized by inflation, pension gaps and economic uncertainties. Digital products, such as neobrokers, provide the target group with direct and easy access to the stock market, while financial influencers use social media to provide information on financial and investment topics. All of this is new and shaping the financial literacy of Generation Z – a super exciting starting point!

How did you go about selecting the sample – were only your own customers included in the survey?

The participants were selected by our partner Appinio on a nationally representative basis for the age and gender of the German population – independently of our own customers.

What influence does the smaller sample size of around 200 Gen Z respondents compared to almost 800 people in the reference group have on the theoretical and practical implications you draw from the study?

Together with Appinio, we deliberately opted for this split in order to ensure a nationally representative study. The target group size of 200 participants from Generation Z is sufficient to draw conclusions from the data. But it also means that to make the results reproducible, we cannot divide Generation Z into even smaller segments, e.g. by gender.

What are the key results and findings of the study for you?

  • Across all generations, only 6% of respondents showed a solid level of financial knowledge, i.e. answered all knowledge questions correctly.
  • One in three persons has not saved any money at all this year.
  • Generation Z attaches much greater importance to friends when it comes to financial matters than people aged 28 and over.
  • Across all generations, women have a better overview of their day-to-day finances, but men show a higher level of financial knowledge.

Gen Z in a generational comparison

How does Gen Z differ from other generations and how does it not?

Financial knowledge: Contrary to many preconceptions, at first glance there is no evidence of an actual decline in financial knowledge between the generations: in both Generation Z and the 28+ age group, only around 6% have solid financial knowledge and answered all the knowledge questions correctly.

Budget control: In both survey groups, only 10% have full control over their budget – in other words, this share knows their own expenditure for fixed costs, variable costs as well as savings and investments very well.

Saving and financial future: In Generation Z, 26% didn’t save or invest anything in the last three months – hardly any different from people aged 28 and over (29%). One in five (19%) of Generation Z is indifferent about their own financial future – that is significantly more than in the older generations (9%).

Private old-age provision: When it comes to the popularity of provision choices, the generations do not differ: across generations, most people rely on classic products (call money, life insurance, building society savings, Riester and Rürup pension schemes), real estate and shares. However, there are clear differences when it comes to inheritance: while one in five people in Generation Z (21%) pencil in inheritance as a form of private old-age provision, this figure is only 11% for people aged 28 and over.

Advice and exchange of opinions: One trend is clearly recognizable in Generation Z: finances and friendships are moving much closer together, and financial topics are becoming less and less of a taboo in personal relationships. Generation Z is much more likely to turn to friends when making financial decisions (Generation Z: 37%, people aged 28 and over: 23%), talks to friends significantly more often about their income (Generation Z: 42 %, people aged 28 and over: 30%) and would rather borrow money from friends or family. Only one in five of Generation Z (20%) trusts their own knowledge when making financial decisions. Among respondents aged 28 and over, this figure is one in three (31%).

Which results have confirmed your assumptions about the target groups surveyed?

Gender differences: In a gender comparison, we see real differences in terms of investment behavior, which is also consistent with our experience. Women invest more rarely than men and tend to choose low-risk products for their private old-age provision. Our assumption is also confirmed with regard to feelings when looking to the financial future: women tend to worry more, while men are more indifferent about the future.

Trust in the state pension scheme: We had suspected that confidence in the state pension scheme was low. Compared to the other provision choices, the state pension is the least popular among Gen Z: only 17% rely on it. Among people aged 28 and over, the figure is 21%; this puts the state pension scheme in second-last place in the ranking of forms of provision, with inheritance in last place. I find this hardly surprising, especially in view of current developments and reports.

Knowledge and handling of finances: surprising study results

Which of the study results surprised you and why?

Financial influencers vs. professional financial advisors: Professional financial advisors are the number one go-to for both Generation Z and the 28+ age group. We weren’t expecting that. We also thought that financial influencers were important in Generation Z. Even though their importance is clearly increasing, only 29% of Gen Z would rely on financial influencers for specific financial questions (advisors: 39 %).

Inheritance: I was really surprised that 21% of Generation Z rely on inheritance for their private old-age provision. Even though inheritance is in fifth place out of six when compared with other forms of provision, that still makes one in five.

Financial knowledge: Across all generations, only 6% answered all four knowledge questions correctly. I had expected more!

Saving: The low savings rate (almost a third of respondents did not save any money in the last three months) makes my alarm bells ring, particularly in connection with the low level of confidence in the state pension. But it also highlights a very important field of action as this is quite simply the reality of life for so many people.

Friends: There was one really nice surprise for me, namely the clear differences between the generations with regard to friends. We hadn’t even thought of this hypothesis beforehand.

Income: I didn’t realize that Gen Z was so much more open about their finances – a really great development! Most of the respondents, nine out of ten, actually talk about their income.

Insights for financial services providers

What specific fields of action result from the study for you as a financial services provider? What can be derived from the study results for Tomorrow?

One thing is clear: the study has once again confirmed to me how enormously important it is to impart financial knowledge. We will continue to expand our educational offerings in our magazine, on our social media channels and in the app.

In order to increase customers’ control over their own budget, we are planning further services in the app intended to make this possible. One feature that we have already developed and are continuing to expand is the monthly overview. It automatically categorizes each month’s expenditure, helping customers to keep an eye on their own spending and identify potential to save money.

We are also working on further savings products and features to make it easier to save regularly.

In the survey, participants stated that, in addition to professional financial advisors, they primarily rely on their own knowledge or consult family and friends when investing. What changes does this imply for you, for example, in terms of the channels or advisory services that Tomorrow wants to use to address Gen Z in the future?

We will continue to expand our educational offering and examine how we can harmonize our product range with the needs of Gen Z.

Financial tips for Gen Z

Based on the study results, what would you recommend to Gen Z customers regarding their financial behavior?

Financial knowledge is the basis: Find formats that suit you and make learning about finance fun. This is the only way to establish a foundation for financial decisions.

Talk about finances: Talk to friends, learn from each other and inspire each other. As a rule, you are not alone with your questions and challenges.

Saving: If possible, start saving regularly now so that it becomes a habit. It doesn’t have to be large sums, but regularity will help you in the future. Set yourself savings goals and celebrate even small successes. Another important thing: saving is always a question of privilege, of course. If it’s not possible to save even a small sum at the moment, then try something else. You might want to start keeping a budget book for a better overview of your in- and outflows or listen to a podcast on the topic of old-age provision. Every little step is a step in the right direction.

Thank you for your answers and your time.

Feel free to contact us!

Sandra Blein / author BankingHub

Sandra Blein

Senior Consultant Office Berlin

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