Youth and money

Financial literacy of young people

The Financial Literacy Index of Latvia in 2022 (FLI) indicates that only 11% of 18-19-year-olds and every third young person aged 20-29 could cover expenses if faced with significant costs equivalent to monthly payments, without borrowing or seeking help from their families. Similarly, every fourth individual has confirmed facing difficulties in covering living expenses in the last 12 months. These events have placed young people in situations they have not experienced before, forcing them to learn firsthand from their own experiences.

And yet, despite possible financial disruptions, when embarking on a permanent life, a young person often follows the philosophy of living for today and not worrying about tomorrow. According to the FLI in Latvia, 70% of individuals aged 18-19 adopt this approach. Only 21% of 16-24-year-olds in the United Kingdom, as stated in the Global Web Index (GWI) survey conducted in November of last year, claim to adhere to their budget. Almost half of them note that they have acquired financial planning and management knowledge from family and friends. Their financial literacy is further enhanced by the fact that, like-minded peers openly and actively discuss financial matters on their favorite social media platforms such as TikTok and Instagram. They talk about earning money with projects, experiment with cryptocurrency investments, share financial advice among themselves, and, most importantly, apply these insights in their lives, understanding and adapting to the basics of the financial world much better than previous generations. 41% of users use TikTok to gather information about investments, surpassing both financial consultants (21%) and financial websites (also 21%).

TikTok is even referred to as FinTok or StockTok. Here are a few examples of TikTok users who share their insights on the platform:

@HumphreyTalks  

With over 1.6 million followers, Humphrey Yang's videos focus on engaging topics that make personal finances less daunting and provide straightforward explanations for various financial processes for young persons.

@HerFirst100k  

After saving her first $100,000 at the age of 25, Tori Dunlap left her corporate job to write about financial feminism. On the TikTok platform, she already has 2 million followers. Tori teaches women worldwide how to invest in the stock market, negotiate salary increases, and responsibly use credit cards.

The youth's hunger for this type of content is immense, but users also need to be cautious as not all content is safe and verified. Meanwhile, for financial brands, it's a great opportunity to represent themselves on these platforms and create authentic and trustworthy content.

What young people expect from a bank

It's not that young people can handle everything on their own. They need assistance in solving financial matters. In a GWI study on how a bank could help, 48% of young people indicate that they could learn how to budget expenses, 37% would benefit from tips on better spending, and 35% on how to pay off debts. Whether it's educational courses, webinars, one-on-one sessions with a consultant, or some automatic savings or investment tool, all of these would be useful for young people in their daily lives. Young people are looking for understandable and simple actions they can take to ease their financial difficulties. Here, financial brands have significant opportunities, positioning themselves as reliable advisors to find formats and ways to convey the necessary information to young people in an easy and understandable form. Brands can engage to help young consumers better control their finances and reduce fears about them by showing how different financial instruments work and how they can be used to ensure both short-term and long-term financial stability. This new generation expects that the digital experience will be both entertaining and educational. The brand's understanding of their issues and how they digitally consume content could make a difference compared to other service providers, but the key lies in mutual communication and collaboration.

For example, to help children and young people learn about finances more pleasantly, Visa and the National Football League (NFL) created an interactive game called Financial Football, where money management skills are learned using football strategies.

Banks vs Neobanks

The digital expectations of young people in the financial world are similar to those in other areas. They expect financial services to be quickly accessible and more integrated. The digital app experience is considered one of the three main factors that ensure a positive banking service experience, as indicated in a report by The Financial Brand.

And it is easy to understand why more and more representatives of Generation Z are migrating to neobanks. For example, to open an account with First Direct, five times more clicks are required than with Revolut. It has also been observed that alongside a traditional bank account, young people often have an account with a neobank because it is simply easier and more efficient to use in their daily lives. Neobank apps provide a complete digital wallet experience, equipped with features such as budgeting tools, as well as e-commerce and third-party integrations, ensuring a direct shopping experience and access to products such as insurance. Moreover, young individuals understand and even expect that brands have access to their data and will use it to personalize their experience. Based on data, it is expected that banks will forecast in real-time how much to save each month and how to build a financial future. Interactive and operational through digital solutions, rather than through messages or consultations at a local branch.

However, it should be noted that this audience also values in-person meetings at the bank. Services such as opening accounts and resolving complaints about fraudulent activities. According to survey data from IBM, 55% of Generation Z bank customers still trust traditional banks more than fintech alternatives (11%) when it comes to solving serious issues such as fraud, indicating the attractiveness of banks as reliable financial institutions.

While the big life may not greet young people with open arms but instead presents them with challenges, they embrace them in their unique way, perhaps overcoming them better than any other generation would have done at the same age. To capture these future consumers, financial institutions need to carefully follow and understand how young people interact with products, how they think about money, what their social associations with money are, and how they discuss it with friends and family. A better understanding of the behavior of young people, not only in financial matters, provides an opportunity to offer financial products based on their values.