05/10/2021: Financial Literacy For A New Generation
Financial literacy for a new generation
At Seneca Savings, we know that success comes in many forms and there is no one-size-fits-all approach. Ironically, the only constant in life is change and as you grow older and take on more responsibility, your financial goals and planning needs change as well.
Education and financial literacy is key to successfully managing your money and achieving your unique goals in the many stages of life, and we’re firm believers that awareness and forward-thinking should begin at an early age, yet we do not work on an island. Seneca Savings is proud to partner with parents, teachers, business owners, and other stakeholders in the community to create and foster what we like to call a “money mindset.”
We love “Generation Z”
Members of this generation were born between 1997 and 2015, so those between the age of 6 and 23 can count themselves among this group. We’ve been honored to spend hundreds of hours in local schools educating K-12 students about developing a strong foundational mindset of money management, saving, and preparing for the future. This outreach has resulted, on average, a gain of 45% in financial literacy and capabilities.
Also called “Digital Natives” because of their constant connectivity to media and information, the oldest cohort of this generation have entered their college years and graduates have launched a career. Money has the tendency to cause stress for all age groups, but young adults top the list for financial anxiety. Coming of age during a global pandemic, young people are increasingly uptight about an uncertain financial future. Let’s touch briefly on just a handful of their concerns and potential pitfalls.
Being saddled with debt
Since Generation Z can face a mountain of debt – namely credit card and student loan debt – it’s not surprising that money management can terrify this age group. It’s difficult to think long-term when playing catch up because all of that debt is holding them back. The prescription we might recommend to this group? Once you start cash flowing in your new profession, live below your means for awhile in order to put a dent in credit card bills and start paying off those student loans. The pressure of keeping up financially with peers by getting shiny, nice, but expensive new things. Peer pressure is a powerful motivator, especially in the age of social media when people show off the rewards of their success. Once young people begin making money when they “spread their wings” by applying their time and talents in the workforce, there may be a temptation to go on a buying binge.
Being conservative with your wants and wishes early on
Our hard-won advice: Be conservative. Know your priorities, think hard about where you want to be financially in 5, 10, 15+ years, and understand there is no urgency to keep up with the Joneses. Not having enough money put aside in case of emergencies and unexpected expenses isn’t a healthy way for anyone to live, but particularly for those who have their whole lives ahead of them. We all know that life is unscripted and that car repairs, medical bills, or other unforeseen expenses can arise. At Seneca Savings, we’ve been alarmed by the number of our customers who do not have an emergency fund in place.
Your Savings Account as an “Opportunity Fund” & Be Wary of Monthly Fees & Subscriptions
Our strong recommendation: Put enough money into savings to weather any challenges when life happens. Consider saving 3-6 months’ worth of expenses for a rainy day, if you have the means. By doing this, you minimize the risk of taking on new debt to cover the expenditure. Having all of that cash parked away need not be a downer, though. Consider rebranding the savings account as an “opportunity fund.” If you have the opportunity to go on a vacation getaway, pursue a new hobby, or have other fun things in mind, you’ll be able to tap into this pool of money when the time is right. Also take advantage of free checking for students. Subscriptions and fees can add up. Look closely at all those ‘auto-withdraws’ that seem like mole hills but after awhile add up to mountains of cash going out of your accounts every month. With a free checking account that’s one less fee you have to worry about.
Some parting thoughts
There are many stages of life, from a grade-schooler learning the basics of money to preparing for college, starting a career, realizing the American dream of homeownership, preparing for retirement, building wealth, and retirees who want to put their life on coast. No matter what stage you’re in, Seneca Savings is dedicated to helping you transition and think smartly and strategically about your finances. Helping you build a safer bridge from here… to there is what working with our local team is all about.