There is one thing we are missing an awful lot of in the world today: patience. Perhaps it’s worth being labeled “word of the year,” as the minority who have managed to keep it in their financial habits are winning in the long run. However, it seems Gen Z lacks patience today.
As a result, the world is seeing excess borrowing and increased risk tolerance among younger generations who seem to be making irrational spending decisions in a rush to live rich quickly in today’s materialistic world. Financial literacy, the understanding of financial skills such as budgeting, investing, etc., has never been more valuable.
Having run an investing and financial literacy club at Stevenson, I have observed much neglect of financial literacy and over-emphasis on investing by members. Often members seem more curious about day trading rather than financial literacy concepts.
While this emphasis could prove promising, investing in such a context is usually in reference to options, derivatives, etc. (all speculative tools used to generate rapid returns) rather than buying businesses for personal wealth accumulation in the future through patience. Ventures like these prove dangerous to high schoolers who have little idea of how to professionally invest in such securities, however feel they have garnered the skills to do so.
Somewhere along the way the youth lost sight of the long game and got absorbed into a ‘short-term mindset’ through such speculative tools. But what hidden complexities warrant today’s impatience?
Social media, for one, is bombarded with many publicly sharing their financial successes, as can be directly seen on the r/wallstreetbets subreddit. While such showings are often misleading, they leave an impression of missing a desired item, which, especially in youth, is an overpowering feeling. Such a feeling fuels impatience in youth, leading to participation in risky endeavors.
Additionally, there has recently been a rise in ‘financial coaches,’ who often falsify their success to lure in customers with promises to the tune of ‘get rich quick’ schemes involving day trading among others. With such phenomenon worsening online, younger generations’ impressionable minds are exposed to an array of bad decisions almost on a daily basis, chiefly, overextending credit to fuel irresponsible spending. From early on they normalize exuberant, even expensive lifestyles, with reinforcement from “professionals” that such lifestyles are quickly attainable with absurd tactics that attempt to exploit credit in perilous ways.
Take this, since everyone at one point was younger, most can resonate with the feeling of really wanting that one toy as a kid. It’s an overpowering feeling, isn’t it? The financial equivalent of this feeling doesn’t go away until much more maturity is acquired, by when it’s too late to fix irreversible mistakes made by impatience early on.
Even Robinhood, notorious for its popularity among young and inexperienced investors, has taken advantage of this by gamifying its investing platform, enticing young investors to trade often, allowing for more commission to flow in with each transaction. The young investor’s mentality has been turned into that of a gambler.
Another complexity comes from accessibility. It doesn’t help that the digital age has made it much easier to make bad decisions. For instance, although credit cards and loans are powerful tools, they are little understood and hence used problematically. Too often, Young people overextend their spending, not realizing the magnitude of the credit they took out or even the fact that they are loans until the bank slaps a massive interest rate (APR) on carried interest (23% Avg. 2024)*. As a result, credit card balance has exceeded 1 trillion and average credit score has decreased for the first time in a decade, according to Unbiased. Unless one is willing to diligently keep track of income and expenses, credit cards are a perilous means of spending.
Not to mention, while credit cards have been around long enough to assess the damage they can do, there is no telling what up-and-coming spending methods might do. trends, like buy now and pay later, can also considerably incentivize risky spending and may require much greater financial understanding.
What can be done to combat this? For starters, a more substantial financial literacy curriculum with engaging real-world concepts can be established across schools. While many schools have done so, around 25% in the US*, it’s a mere check in the box rather than a realization of the gravity of our situation.
Stevenson runs such a course for merely one semester, even offering ways around it. This is because forced educational policy enacted by the state seldom leads to active enforcement. Ensuring public perception changes is crucial before policy changes ensue. A skill for a lifetime can rarely be acquired in three months.
Finally, financial institutions, like those used by teens, can embed unbiased financial education. Popular apps such as Robinhood can gamify financial education, allowing for much easier access. Optional modules or pop-ups that appear with info as a user moves through the app can teach people content in increments. Youth advocacy in these areas is crucial.
If the younger generation is being weighed down in debt, chained to their lender’s whim for their bad decisions they made against their better judgement, or because of our ill equipped financial literacy resources, it’s unlikely they will have a good grasp of the future that we so desperately hope to endow upon ourselves.
*data from Lending Tree
*data by NGPF