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The TIAA Institute and the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University (GW) School of Business published a report about the levels of financial literacy among the five generations in the US. According to the report, financial literacy is low within each of the five generations—the Silent Generation (55%), Baby Boomers(55%), Gen X (49%), Gen Y (48%), and Gen Z (43%)—but is the lowest among Gen Z.

The p fin index questions totaled 28, over eight key areas, including income, investments, consuming, risk, and credit. This is an annual barometer of financial wellness and a measure of financial education among the five generations.

The research found that financial knowledge increases with age, but does not significantly improve through the life stages. It further states that low financial literacy levels correspond to future financial wellness prospects. The statistics sounded alarm bells and pointed to gaps in financial education to help individuals with sound financial decision-making.

What is financial literacy?

According to the United States Treasury's Financial Literacy and Education Commission, financial literacy is “the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial wellbeing.” 

What are the 5 principles of financial literacy?

In order to become financially literate,  there are five key components that have to be managed: how much do I earn?; how do I spend money?; the best way to save and invest; accessing and using credit; and, finally, how do I protect my money. 

Earn: How much do I make?

  • Understand how much money is earned from your job (gross income), how much is deducted, and what is left over as the net income.

Spend: Allocate money to spend and save

  • Develop a personal budget to indicate how much to spend, and how to reach financial goals. By checking how you normally spend one month's earnings, you will be able to decide where to cut down, and how much is left for saving.

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Save: What do I want to achieve financially?

  • Saving is important as a concept to everyone. However, most people need specific goals to focus on, whether it's a retirement plan, car and house purchase, an overseas holiday, or paying off personal debt.

Borrow: Credit cards, loans, and your credit score

  • Even if you’re a diligent saver, at some point you may have to borrow money to cover a large expense like a home or car. Maybe you borrowed money as a college student and are currently dealing with student loans or credit card debt. Borrowing isn’t necessarily a bad thing—as long as you know how to compare loans and maintain a healthy credit score

Protect: Preventing fraud and buying insurance

  • Once you’ve set yourself up with a solid budget and investment strategy, it’s important to protect the money that you’ve made. This means regularly reviewing your bank accounts and credit card statements for mistakes or suspicious activity; keeping documents and passwords secure to prevent scams and identity theft, and buying the right kind of insurance to protect yourself in the event of an emergency. 

How does age affect financial literacy?

Financial literacy tends to be low within each of the five generations, but particularly so among Gen Z. Two-thirds of Gen Z could answer only 50% or less of the index questions correctly.

Within Gen Z, financial literacy tends to be lowest among those who have never attended college. On average, this group correctly answered only 39% of the index questions.

Across generations, financial literacy tends to be greatest in the areas of borrowing and saving. However, financial literacy in these areas tends to be lower earlier in the lifecycle.

Gen Z is the generation most likely to have been offered and to have participated in a financial education class or program. However, the fact that they display the lowest financial literacy could be due to their lack of financial responsibility. They are possibly not participating in the economy, and are probably dependent on parental or government support of some kind.

Gen X reported significant financial challenges along the dimensions tested, with twenty-eight percent reporting they have difficulty making ends meet in a typical month. This could be attributed to their jobs experiencing slumps due to economic uncertainty created by the pandemic, personal finances under pressure due to repayment of student debts, and the fact that they lack financial literacy.

About twenty percent of Gen Z, Gen Y, and Baby Boomers report difficulty making ends meet.

Eleven percent of the Silent Generation report difficulty in making ends meet. This is an indication that the Silent Generation probably possesses higher functional knowledge in order to carry out significant financial decision-making. It may also be attributed to them accessing appropriate sources to help make better financial decisions. Utilizing sound investment types and managing to spend early on probably culminated in effective management of personal finances.

Does the financial literacy of an individual increase with age?

Financial literacy tends to be low within each of the five generations, but particularly so among Gen Z. Two-thirds of Gen Z could answer only 50% or less of the index questions correctly. By comparison, approximately 40% of baby boomers and the Silent Generation had no more than 50% of the questions answered correctly.

These findings indicate that individuals typically begin adulthood with low financial literacy and while it increases over time, functional knowledge peaks at just over half. This indicates a slight improvement with age and means that more educational interventions need to take place as the population matures.

Why is financial literacy important for Gen Z?

Financial literacy classes teach students the basics of money management: budgeting, saving, debt, investing, giving, and more. That knowledge lays a foundation for students to build strong money habits early on and avoid many of the mistakes that lead to lifelong money struggles.

Understanding uncertain financial outcomes are one of the key financial wellness indicators. The greatest financial challenges for younger generations can be attributed to relatively low financial literacy.


The data gathered by the Global Financial Literacy Excellence Center (GFLEC) is an important tool that measures knowledge of how individuals inherently function in the area of personal finances. Although Gen Z survey respondents reported the lowest financial literacy, indications are that this generation have had access to some financial education at school or college as part of the Life Skills curriculum.

It is possible to conclude that financial literacy nonetheless goes hand in hand with personal financial knowledge. In other words, when Gen Z have access to good job opportunities, and Gen X are able to deal with their current financial challenges in a more normalized economic climate, financial education will impact the adult population in much more positive ways.