Over the past few years, “financial literacy” has become a buzzword both within and outside of the financial services industry – and for good reason.
Not only is managing money growing increasingly complex, with more direct-to-consumer financial applications and investment experiences available than ever before, but research also indicates that an alarming percentage of Americans are considered financially illiterate (66%, according to FINRA).
The Need For Financial Literacy
The desire for change isn’t the problem. Eighty-seven percent of Americans believe financial literacy should be taught to children in schools. While that’s starting to happen, the impact hasn’t been nearly significant enough. A report leveraging data from the 2021 TIAA Institute-GFLEC Personal Finance Index (P-Fin Index) showed that while financial literacy was low among all five generations studied (spanning the Silent Generation through Gen Z), Gen Z respondents scored the lowest, in spite of being the most likely to have participated in a financial education class or program.
But splitting generational hairs or focusing financial education efforts exclusively on the younger generations won’t address the underlying financial literacy epidemic. Instead, the solution is empowering all ages with financial education and tools that inspire valuable financial conversations with their family members.
Financial advisors are uniquely positioned to address the financial literacy crisis across multiple generations, from baby boomers to the emerging Generation Alpha. After all, these trusted professionals have a deep, usually exclusive understanding of their clients’ financial circumstances, needs and goals – most of which include their family members from other generational cohorts, in one form or another.
Multiple Generations
Let’s consider the impact of financial literacy application across multiple generations.
Millennial parents and their tech-first Generation Alpha children in particular present a powerhouse combination for advisors who act as financial literacy advocates. According to Forbes, millennials believe that schools and their own parents failed to adequately teach them about financial concepts, so they’re passionate about helping their children learn about saving for education, pursuing entrepreneurship, giving charitably and generally being smart with money.
What’s more, millennials are poised to inherit trillions from their parents, positioning them to have five times the wealth they have today by 2030.
The preceding generations – namely, boomers and Gen X – have a substantial stake in the long-term success of this wealth transfer, which will have a direct impact on their ongoing legacy. The preservation of generational wealth has been a long-standing financial planning challenge, with estimates indicating that a staggering 90% of family wealth will be gone by the third generation.
For boomers and Gen Xers, teaching their grandchildren smart financial habits is a powerful way to establish financial security for their families for generations to come, while increasing the likelihood that what they’ve worked so hard to build will live on. But they’ll have to do it by speaking the language of Gen Alpha and Gen Z – namely, through technology.
The Role Of Technology
Gen Z’s tech savviness is well documented, and the gap between their estimated spending power of over $140 billion and their financial literacy creates a significant opportunity for advisors to help equip their grandparents with the technology tools necessary to help them make smarter financial decisions.
Poised to surpass millennials as the largest generation by population, and already outpacing Gen Z when it comes to tech acumen, Gen Alpha represents a future that could turn the financial literacy tide in America and globally.
While this emerging generation may not be on the radar of many advisors yet (as of this writing, the oldest members of Gen Alpha are just 13), the most forward-thinking financial professionals will recognize and capitalize on the potential to improve their existing client relationships and build new ones by exploring ways to promote tech-enabled financial literacy within the full generational continuum of the families they serve.
An Opportunity For Advisors
Doing so isn’t just a noble pursuit, though it’s clear our country is in dire need of financial professionals who care about taking action to address the financial literacy epidemic. It’s also a savvy business move that could have exponential growth implications for financial firms, both over the short-term and in decades to come.
As wealth continues transitioning between generations, leveraging financial literacy technology tools can create a two-way bridge, enabling advisors to capture the attention of the tech-savvy younger generations while also fostering relationships with grandparents who have a vested interest in passing on their legacy, values and wealth to their grandchildren.
By embracing technology that promotes financial literacy, advisors can create an integrated approach to financial education that spans all generations, simultaneously meeting a critical societal need, strengthening client relationships and laying the foundation for future growth.
Tanya Van Court is the CEO and Founder of Goalsetter.
