- New research from Pay.UK highlights a stark generational divide in financial confidence, with only 25% of Gen Z feeling “very confident” managing their finances, compared to 47% of Baby Boomers.
- Younger generations struggle with foundational knowledge, as only 26% of Gen Z can correctly calculate compound interest and 35% understand savings accounts, in contrast to 47% and 59% of Baby Boomers, respectively.
- The majority (86%) of respondents support personal finance education in schools, underscoring widespread concern over younger generations’ preparedness for real-world financial management.
LONDON, 13 November 2024 – New research from Pay.UK, owner and operator of the Current Account Switch Service, reveals a stark generational divide in financial confidence and knowledge across the UK. Younger generations, particularly Gen Z, reveal lower levels of financial competence, with only 26% able to correctly calculate compound interest and just 35% understanding how savings accounts work. In contrast, 47% of Baby Boomers were able to correctly calculate compound interest, while 59% understood how a savings account worked.
The research, which surveyed over 4,000 UK adults, highlights that while 45% of Gen Z can identify a Direct Debit, only 37% correctly identified an ISA (Individual Savings Accounts) – despite 63% of Gen Z respondents stating they believe they are financially literate. This is significantly lower than Baby Boomers, 91% of whom correctly identified a Direct Debit, while 80% did the same for ISAs. This knowledge gap is underscored by the fact that 40% of Baby Boomers and 47% of the Silent Generation report feeling “very confident” managing their finances, compared to just 25% of Gen Z, 26% of Millennials, and 24% of Gen X.
The generational divide extends to awareness of current accounts as well. Only 63% of Gen Z could correctly identify a current account as “a type of bank account for everyday transactions with easy access to funds,” compared to 68% of Millennials, 87% of Gen X, 95% of Baby Boomers, and 96% of the Silent Generation. Moreover, 12% of Gen Z and 9% of Millennials incorrectly think a current account is a “long-term savings account,” compared to just 4% of Gen X, 2% of Baby Boomers, and 1% of the Silent Generation.
Education has played a defining role in shaping these generational differences. The majority of respondents said they did not learn about key financial terms at school: only 11% of overall respondents reported learning about pensions, while 15% learned about income tax, 16% learned about paying bills, and 16% learned about savings and investments. An overwhelming 86% agree that personal finance education should be formally taught in schools as part of the national curriculum. This demand for structured financial education reflects a growing concern that younger generations are unprepared for real-world financial management. This report also reveals that 19% of Genz and 23% of Millennials are currently using Buy Now, Pay Later (BNPL) schemes, reflecting not only evolving spending habits but also a need for guidance on budgeting and debt management; these figures are compared to only 8% of Baby Boomers who use BNPL.
Financial stress is another common thread among younger adults, with 26% of Gen Z, Millennials, and Gen X reporting feeling anxious about managing their finances, compared to 16% of Baby Boomers and 7% of The Silent Generation.
John Dentry, Product Owner at Pay.UK, commented: “Many banking providers now offer resources like workshops, online tools, and financial literacy programs to support their customers in building financial skills, an essential step toward managing money more confidently and avoiding financial pitfalls. Whether it’s choosing the right current account or learning how to manage your finances effectively, the right support can make a real difference in financial resilience.
The Current Account Switch Service makes it quick, easy, and free to switch to a provider that best serves your needs, giving you the confidence to take control of your finances”.
