In an era of growing financial complexity, we're facing a critical question: Are we equipping our young people with the financial knowledge they need to thrive? Our recent research into Gen Z borrowing habits has uncovered some trends that suggest that more is needing to be done.
Young people’s access to financial education
Let's start with the numbers. Only 25% of Gen Z borrowers report receiving financial education from school or college courses. Instead, the most common source of financial education among this generation is parents and family members (representing 43% of respondents). This reliance on family advice is further supported by StepChange's November 2024 Client Insights report, which found that 51% of young adults consider consulting family for financial advice and a YouGov poll commissioned by StepChange Debt Charity in September 2024 that named family as the number one cited source of advice for 18-24 year olds.
But here's the catch: according to the Money and Pensions Service (MaPS) UK Strategy for Financial Wellbeing, only 47% of children in the UK are receiving meaningful financial education. So, are we inadvertently perpetuating a cycle of financial illiteracy?
Schools and college
Despite financial education being part of the secondary school curriculum in England since 2014, its implementation appears inconsistent. Academies and free schools, (who account for the education of over half of the UK student population) aren’t required to follow the national curriculum beyond core subjects, meaning that while financial literacy is on the education system’s agenda, it might not be being effectively executed.
A major issue for schools, as identified by UK Finance in its 2024 Financial Education Report, is that of funding. While banks and the FCA account for most financial education funding, the lack of direct government financial support for this educational outcome is creating significant barriers to schools and college’s implementation of this much needed life skill.
Parents and family
Meanwhile, while turning to parents and family for financial guidance may seem like a natural and trustworthy option, it's not without its pitfalls. The quality of advice is only as good as the knowledge and experience of the giver. Parents, while well-intentioned, may be passing on outdated information or perpetuating financial habits that aren't suited for today's economic landscape.
Consider this: 70% of UK adults believe better financial education during their school years would have significantly improved their ability to manage finances in the face of economic challenges. This statistic suggests that many parents (who presumably form part of this 70%) may not feel fully equipped to provide comprehensive financial guidance themselves.
Furthermore, in a world where financial products and services are constantly evolving, advice based solely on personal experience may not account for newer, potentially better options for managing money. Therefore, while family advice can offer a foundation of trust and personalised guidance, it's crucial to supplement this with access to up-to-date, accurate financial information from reliable sources.
Social media influence
Meanwhile, social media is emerging as a significant source of financial information for young people. Our research shows that 27% of Gen Z seek financial guidance from social media platforms, with 10% turning to influencers for advice. While this can provide accessible information, it also poses risks. The Financial Conduct Authority's March 2024 warning about financial promotions on social media highlights the need for caution in this space.
The consequences
The consequences of inadequate financial education are significant. According to the FCA Financial Lives Survey 2022, 24% of UK adults have low confidence in managing their money. Not to mention the aforementioned majority of UK adults believing better financial education at school would have improved their money management.
According to the younger generation themselves, 53% of Gen Z respondents in our study are concerned about the money that they currently owe. This is despite 84% of them claiming to understand debt. However, when we delve into the detailed aspects of lending and debt, we can start to see where concern may creep in
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Only 1 in 3 respondents were confident in their understanding of the terms and conditions of lending,
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27% claimed to understand how their credit profile works, and
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28% claimed to understand interest rates.
Suggesting that while young people believe they understand financial concepts, their current level of understanding leaves them ill-equipped to navigate the complexities of real-world financial decisions.
This might not be a surprise to readers, as the survey sample are young and we shouldn’t expect them to be interested in the detail, or simply they don’t yet need to know these things. But herein lies the problem - if we consider that attitudes toward money are set during our childhood, perhaps we should go a little further in ensuring the ‘boring’ aspects of lending are understood early on.
What’s the solution?
It's clear that relying solely on schools or parents isn't enough. We need a collaborative approach involving financial institutions, educators, policymakers, and yes - even social media influencers.
Banks, in particular, have a unique opportunity - and responsibility - to step up. UK Finance reports that in 2023, its members provided financial education lessons to over 4.1 million children and young people, a 94% increase since 2019. Many banks have also created free resources for developing financial skills, targeting different age groups.
However, despite these efforts, nearly half (45%) of young adults have never engaged with banks' financial education platforms. This indicates a need for more innovative approaches. As William Vereker, Chair of Santander UK, points out, "Banks have a critical opportunity to connect with young people by delivering accessible, engaging financial guidance tailored to their needs and preferred platforms."
Concluding thoughts
The barriers are stacked up, but so is the potential for positive change. So, how can we make financial education not just accessible, but irresistible to young people? How can we ensure that every young person, regardless of background, has the tools they need to build a secure financial future?
The answers to these questions won't be simple, but they're crucial for shaping a financially literate and empowered next generation. It's time for all of us - banks, educators, parents, technology developers, and society at large - to step up to this challenge. After all, the financial health of Gen Z isn't just their future - it's ours too.
Read more insights into what it takes to engage Gen Z borrowers in our latest report.
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