Generation Z adults—individuals who are between 18 and 25 years old—prove to be more financially sophisticated than any previous generation was at their age, according to The 2022 Investopedia Financial Literacy Survey. But they also have the most to learn.
More than half of Gen Z adults are already invested—with 26% of that group invested in the stock market—yet only one in four feel they understand the stock market well enough to explain how it works to a friend. And of all financial concepts, they feel most confident about spending and saving.
- Though 54% of Gen Z hold some kind of investment, only one in three (31%) feel confident that they can explain how the stock market works to a friend.
- About a quarter of Gen Zers in our survey hold cryptocurrencies and stocks, and one in 10 own NFTs.
- Though Gen Z feels the most confident about consuming and saving, nearly one-third feel they have just a beginner's knowledge of financial management basics like paying taxes and borrowing/managing debt.
- Gen Z who have an income of more than $50,000 are more likely to be confident in their financial knowledge (57%) than those who are making less than $50,000 (39%).
- Forty-four percent of Gen Z who are not investing say it’s because they don’t know where to start.
As 23-year-old financial advisor Zechariah Schaefer, whose firm Ascent Personal Finance specializes in providing advice for millennial and Gen Z crypto investors, puts it: “They know lots of things about finance loosely, but they don’t know a lot of things deeply.”
Take Megan Rienzo, for example. The 20-year-old Siena College sophomore, who is on track to receive a degree in finance, keeps meticulous track of her spending and savings by using a smartphone app. Through her courses in finance, she has learned how to value stocks and feels strongly about investing but still finds it too complex and risky for where she currently is financially to actually start.
In short, the financial picture for Gen Zers older than 18 is a study in contrasts.
Finding Their Financial Footing
It takes a very self-aware generation to know what they don’t know. And members of Gen Z who took part in The 2022 Investopedia Financial Literacy Survey, which polled 4,000 U.S. adults via an online questionnaire, understand that they are only at the beginning of their journey to financial independence.
Only 46% of Gen Z feel confident about their financial knowledge, for instance, which is a lower percentage than baby boomers, Gen X, and millennials who said the same. Part of the reason why could be that, in 2022, there are so many places for people to consume information—think YouTube, podcasts, and TikTok, in addition to traditional news articles.
“There’s so much information available that it’s harder to know what to look for,” Rienzo said.
Gen Z doesn’t lack confidence when it comes to spending and saving, however. Forty-five percent of those polled claim to have advanced knowledge of spending, while 42% said the same about saving.
Schaefer notes that the zealous spending and saving habits of Gen Z (and his clients specifically) can be attributed to them watching their parents struggle with mortgage, credit card, and other debt. Some clients, Schaefer said, feel increased pressure to save due to the debt they themselves face from student loans.
An area where Gen Z struggles, though, is understanding credit and debt management. Based on Investopedia’s survey results, just under one-third of Gen Z polled feel they only have a beginner’s knowledge of credit and managing debt.
All in On Investing
Jack Rosenthal was first introduced to investing when he was 8 years old and his grandfather set up an investment portfolio for him. In high school, he went on to start the Young Investors Club, LLC—a fund designed for teens to invest in the stock market that now has about 100 members and more than $100,000 assets under management. He’s also the author of several books, each of which serves as a how-to to investing for teens. He’s 19 years old.
Rosenthal is the ultimate personification of Gen Z’s enthusiasm for investing. Fifty-four percent of Gen Z hold some kind of investment, according to Investopedia’s survey, ranging from mutual funds and exchange-traded funds (ETFs) to cryptocurrencies and non-fungible tokens (NFTs).
Moreover, everyone seems to be getting in on the action in some shape or form. Forty-eight percent of Gen Z women in our survey hold investments, versus 60% of Gen Z men, for instance. And in general, 45% of those earning less than $50,000 per year are investing, compared to 73% of those earning more than $50,000.
“Because of social media, Gen Z knows more about investing at their age than any other previous generation,” Rosenthal said. He also notes that changes in the regulatory environment, such as allowing teenagers to have parentally supervised accounts, have opened the door to the stock market.
According to a 2020 survey conducted by the Harris Poll, more than half of respondents do not talk about finances with friends or family. But the youngest generation strays from that average: 71% of respondents say they are comfortable talking about money with friends, and 67% are comfortable talking about money with family—the most likely for all generations in both categories.
Emerging financial technologies are particularly popular with Gen Z. About a quarter of Gen Z investors hold both cryptocurrencies and stocks, and one in 10 own NFTs. Men in particular own cryptocurrencies and NFTs at a rate that nearly doubles that of women. But despite their mass involvement in this market, Gen Z admits cryptocurrency in particular is last on their list of financial knowledge.
That’s a recipe for trouble, according to Schaefer.
“You hear about people making money in crypto and NFTs and feel confident and want to go for it,” Schaefer said. “And before you know it, you’ve taken on too much risk and are overextended.”
Watch and Learn
Gen Z is the first generation to grow up with smartphones and social media as part of daily life. They came of age with YouTube, Facebook, and the iPhone. And today, the youngest population spends about 6.5 hours on their smartphones per day.
But Gen Z isn’t just looking for entertainment—they are looking for information. According to digital education company Pearson, YouTube and video in general are Gen Z's preferred learning platforms, ranking second only to teachers as a learning tool.
According to Investopedia’s survey, Gen Z is the most video-forward generation when it comes to learning about personal finance in particular. YouTube is the most popular source for consuming finance-related information at 45%, followed by conversations with friends and family, Internet search, TikTok, and financial information sites.
The sheer volume of money-related advice on social media—from self-proclaimed finance experts on TikTok to Reddit forums like WallStreetBets—makes proper vetting a daunting prospect. After all, there is no credential requirement for what one plans to say on Instagram or any other social platform.
Despite their preference for digital solutions, nearly one in three Gen Zers cite human interaction as their preferred way to learn about finance.
“The personalities and charisma of some of the people on these platforms makes it easy to forget that personal finance is indeed personal,” Schaefer said.
Yet there’s no denying that video and social media have democratized access to financial information. What used to be a scarce asset reserved for only those wealthy enough to pay for it, is now—thanks to digital media—an abundant resource for all. With that access comes responsibility, however, such as conducting your own research before taking investment advice and doing a background check on the source providing the information.
Cause for Concern
When asked about their personal finance knowledge, Gen Z is specifically concerned about taxes. Paying taxes ranks as their second biggest concern and the No.1 skill they’d like to learn, according to Investopedia’s survey. The other big concerns for Gen Z are saving, borrowing, and managing debt.
The financial behavior of Gen Z can be traced in part to the global COVID-19 pandemic. Members of this generation were among the most impacted, according to a study conducted by the ADP Research Institute. Seventy-eight percent of Gen Zers found their personal lives were affected, while 39% say they lost their jobs, were furloughed, or faced a temporary layoff.
Below, take a closer look at Gen Z’s biggest concerns.
The lower the income, The 2022 Investopedia Financial Literacy Survey shows, the more interest Gen Zers have in learning about taxes. Thirty-seven percent of Gen Zers who make less than $50,000 cited “how to do my taxes” as the skill they’d most like to learn, versus 31% for those making more than $50,000.
One factor that has been suggested as a possible explanation for Gen Z’s focus on taxes is the general belief that the Social Security net will run out. Nearly one-fifth (19%) of people say it’s not at all likely that Social Security will be available to them when they retire, and 43% say they can imagine a time when Social Security no longer exists.
Another factor, according to Schaefer, could be that, amid the gig economy, there are more self-employed or entrepreneurial-minded Gen Zers wanting to start their own businesses, which can create complicated tax scenarios.
Those of Gen Z who make less than $50,000 annually are more worried about saving and improving their credit score than those making more than $50,000.
And this data matches the reality of debt younger adults face today. In 2020, both millennials and Gen Z saw the greatest overall debt growth, with Gen Z seeing the largest growth across mortgage and personal loan debt specifically, according to Experian’s consumer debt research.
Investing and managing risk
Even though more than half of Gen Z is already invested in the stock market, investing and managing risk are among their least understood aspects of finance. Thirty-two percent of Gen Z cite being afraid to lose money as holding them back from investing, for instance, while 22% of those who are not invested say it’s because they don't trust the market.
Rosenthal, the teen investing guru, suggests that the fear of risk is socioeconomic. More specifically, stock market volatility over the past decade resulting from such things as the popularity of retail investing, the war on terror, and digital disruption has made investing scary for some of Gen Z.
“Massive swings in the stock market create fear, and that’s the only market this generation has known,” Rosenthal said.
If fear isn’t keeping them from investing, it’s confusion. The explosion of financial products and services aimed at simplifying the investing process for young investors has instead made it appear more complex. Forty-four percent of Gen Z who are not investing say it’s because they don’t know where to start, making it the most popular reason for staying on the sidelines. Moreover, 40% of Gen Z crypto investors say they don’t really understand crypto. Or, as Rienzo put it, “I know that Bitcoin is a thing, but I’m not sure what kind of thing exactly.”
What Does Generation Z Need?
Overall, Gen Z is far ahead of where previous generations were at their age when it comes to financial literacy. If anything, though, they may be moving too fast and too much on their own.
According to Schaefer, the abundance of information available can lead to a false sense of security. “You can find anything you want about a financial plan on Google, but Google can’t make you a personal financial plan,” he said. “My advice would be to slow down, figure out where you are, and get help developing a plan for where you want to go.”
The 2022 Investopedia Financial Literacy Survey quantifies U.S. adults’ understanding of their own financial literacy at the generational level. The survey was fielded via an opt-in, online self-administered questionnaire between Jan. 27 through Feb. 7, 2022, to 4,000 U.S. adults, 1,000 each of which were from the following generations: Generation Z (18-25), millennials (26-41), Generation X (42-57), and baby boomers (58-76). Quotas and data weighting were used to ensure race/ethnicity, gender, regional, and income representation among the total and within each generation. To learn more, see the full methodology.
Survey research and data analysis led by Amanda Morelli.