Why Financial Literacy Matters More Than Ever for the Younger Generation 

Although it was added to the curriculum a decade ago, only a quarter of young UK adults report actually receiving any financial education in school. Yet it’s arguable that no generation has needed strong financial literacy more – by Millie Fuller

  
 
Newly independent young adults today are facing rising living costs, a rapidly shifting job market, and an increasingly complex financial system. At the same time, they’re overwhelmed by people and companies promising to help them navigate these challenges.

Today, we’re diving deep into these problems to show how a solid foundation of financial literacy can help younger generations avoid them, or even turn them into opportunities. 

Social Media and the Rise of TikTok Influencers

 
Social media has given today’s youth an ocean of financial information at their fingertips, and they’re more than keen to explore it. As many as 79% of young people now turn to TikTok or Instagram for financial advice. 

But without a strong grasp of the fundamentals of personal finance, it’s impossible to sort the good from the bad. And unfortunately, there’s plenty of bad. 

Many financial influencers have no formal training or credentials in the field, and some are marketing risky activities like crypto and forex trading as quick paths to financial independence. 

The platforms don’t help matters either, as they reward sensational ‘get rich quick’ content, spreading misinformation. They also push easily digestible and often sensible-sounding ‘quick tips’, which may be out of date, inaccurate, or even illegal. 

Yet with a basic level of financial literacy, most of these common pitfalls can be easily avoided. 

The Growing Complexity of Personal Finance

 
It’s a cliché to say that life in the past was simpler, but when it comes to personal finance, it’s absolutely true. 

Take pensions, for example. Whereas defined benefit pensions used to be the norm, guaranteeing a certain level of retirement income, the 21st century has seen a transition to defined contribution instead. 

This means today’s young investors must ensure their own pension is adequate, despite many never having calculated whether they’re saving enough. And by starting new schemes with every new job, even knowing how much they’ve already saved is a challenge. 

Lacking a solid grasp of how debt, interest and investments work can lead to a lot of long-term financial stress when it comes to making decisions like these. The default option is not always the best fit. 

Debt Pressure

 
Debt isn’t something most young people in the UK are willingly taking on to help start businesses. For many, it’s a necessity just to survive from one month to the next amid living costs that never seem to cease rising. 

Homeownership also seems increasingly out of reach, with mortgage lenders demanding deposits that could take years to save for. All the while rents are rising, along with fuel and food prices. 

It’s no wonder many are regularly raiding their overdrafts or turning to payday lenders to make it from one month to another, often without realising the true costs of doing so. 

This all puts a terrible strain on their finances, but one that could easily be alleviated with greater financial literacy. This enables them to take proactive steps, like cancelling unwanted subscriptions, choosing better savings accounts, and preparing budgets. 

Building Independence Through Financial Literacy

 
All the factors above leave today’s young adults feeling frustrated and lacking control over their lives. Financial literacy offers a path back to independence, and the knowledge to make big financial decisions with confidence. 

Even just a basic understanding can help, as research has shown that US adults who took just one personal finance class in secondary school were five times more likely to feel ready to take control of their situation after graduation. 

And unlike what they see on social media, where financial independence often means already having a vast amount of wealth, financial literacy can be attained quickly. 

Financial education offers a much more realistic way to give young adults more agency. Even before they have built their wealth, they’ll be able to confidently weigh up complex financial decisions like leaving a job or starting a business. 

Conclusion

 
Financial literacy is a foundational life skill, and it’s a great failure that many leave school without it. However, it’s never too late to learn, and today there are many ways to do so that can easily fit around employment. 

Plus, with living costs that never seem to stop rising, and the next economic shock potentially just around the corner, there’s no time like the present to equip yourself with the necessary skills to secure your own financial future. 

Millie Fuller, Guest Writer

millie.fuller@contentncoffee.com is a creative copywriter with a passion for writing (and a love of coffee).
 

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