Lack of financial knowledge isn’t stopping them from spending money, but the cost of financial illiteracy is high, and its results are already being observed across the 18-30 age group primarily in the UK and the US. According to the Federal Reserve, those aged 18 to 29 are carrying $1.12 trillion of debt. The average student loan debt in the U.S. reached $37,574 in 2023, and credit card debt among 18-34-year-olds hit record highs. 

The debt-first way of living, observed in both the US and the UK, is compounded by two key factors; the rise of buy now, pay later apps, which allow shoppers to spread the cost of large purchases over several months (or even years) and the increasing digitisation of money.

When using a credit or debit card rather than actual cash, the physical value of the transaction is lost, and you have no tangible way of knowing how much you’re actually spending.The temptation to spend more and more with a magic piece of plastic is strong, particularly among younger age groups, and so debt accumulates, but it is very much out of sight, and therefore out of mind.

Failing to understand the finer points of debt, such as interest rates or repayment plans, can leave Gen Z trapped in a never-ending circle of worsening debt.

Lack of budgeting knowledge can leave some scrabbling together the money for necessities at the end of the month after a pay-day blowout the previous month. Many workers fresh out of university in their first or second jobs live paycheck to paycheck, too, with no longer-term savings plan or financial safety net.

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The allure of easy money to offset debts is also a strong pull for the under 30s. Cryptocurrencies, meme stocks such as dogecoin, and get-rich-quick schemes have lured many young people into risky financial ventures without a clear understanding of the potential pitfalls. A 2021 Charles Schwab survey found that 55% of Gen Z investors began investing in individual stocks or cryptocurrencies without fully understanding the risks involved. These schemes often offer quick wins that rarely pay out, and the overload of information to a financially unsavvy youth can leave them at best feeling overwhelmed, and at worst, significantly out of pocket.

The implications of financial illiteracy are far-reaching and dangerous, and the rising numbers of money mismanagement among young people must be halted . Luckily, the tide has begun to turn. In 2021, the Financial Times established the ‘financial literacy and inclusion campaign, aiming to “democratise financial education” by offering free content to those who need it most, including young people. Likewise, MyBnk offers  financial education workshops for 5-25 year olds with UK schools and youth organisations.

Money and Pensions Services has published a ‘talk money week toolkit for schools’ which includes resources to help schools promote the financial wellbeing of their pupils. Likewise, MyBnk offers  financial education workshops for 5-25 year olds with UK schools and youth organisations. Money and Pensions Services has published a ‘talk money week toolkit for schools’ which includes resources to help schools promote the financial wellbeing of their pupils.And the picture isn’t entirely bleak. According to a report published this year by The London Foundation for Banking and Finance, 85% of young people surveyed would like to improve their financial situation, and 82% would like to learn more about how to do so. This willingness, combined with the right tools and guidance, could pave the way for significant improvement.

Financial literacy is not just a skill, it’s a necessity. For today’s Gen Z, and for future generations, gaining fluency in money management is essential to navigating a complex financial landscape, with an increasingly digitised currency. But until systemic changes are made, many will continue to learn the hard way, paying the high price (quite literally) for a lack of foundational knowledge. For this generation, the stakes couldn’t be higher, and the time for action is now.