For millennials and Gen Z-ers, financial literacy is a germane topic as young adults grow into responsibility for their own economic decisions. Although managing personal finances is a critical aspect of independence many are, at first, daunted by the task—feeling ill-equipped for financial decisions and unsure of the best course of action. Often, people cite the lack of personal finance classes in high school as a principle source of their discomfort; but many factors beyond such external resources work together to influence financial behavior. One’s cultural narrative figures heavily, our cultural background affecting our financial decisions as much as our ideas and opinions. The cultural narrative is a primary source from which our thoughts and feelings about money originate.
As a Canadian with Japanese and Russian backgrounds, and having lived in Japan and Canada, I can proudly say that I am truly multi-cultural. Each of my diverse cultures has distinct values, passed from generation to generation, and as deeply ingrained in me as in my parents and grandparents. While some of these values share basic elements, others clash with one another— resulting in confusion and ambiguity over my decision-making. This process repeats every time a major issue arises to re-trigger conflicting mentalities, temporarily allowing my emotions to take over the decision making. On the surface, financial behaviors may seem to be detached from our cultural background but, in fact, cultural norms and beliefs affect our financial decisions in subconscious ways that cannot be explained merely quantitatively.
For example, the concept of investing has only recently begun to spread among the younger generation in Japan as an effective way to grow personal assets. Growing up in Japan I was never exposed to the notion of personal investment. Asked about Japanese openness to personal investment, Japan strategist at a Hong Kong-based brokerage firm, Nicholas Smith, stated, “Japan at the moment just doesn’t have the culture for it.”
The Japanese do not reject personal investing outright; but, unlike North Americans, investing simply isn’t the first line of accumulating wealth for many Japanese. It was only after I came to Canada that I heard people talking casually about investing in the course of daily conversations. This example demonstrates how differences in values between cultures affect what financial concepts and strategies dominate personal finance.
Here is another fascinating example. In 2018, Swiss researchers Brown, Henchoz, and Spycher surveyed over 700 secondary school students in the Swiss canton of Fribourg, on the border between French- and German-speaking regions, to investigate the effect of cultural background on financial literacy and attitudes. They found that German-speaking students had a higher level of financial literacy than French speakers, due to a significant disparity in their “embedded cultural differences.” They reported that “students in the German speaking region are more likely to receive pocket money at an early age and are more likely to have independent access to a bank account than students in the French speaking region.” Thus, in spite of geographical uniformity, the different German and French societal customs created major differences in the financial competency of the two populations.
As shown above, although economic education may play a role in young people’s personal financial literacy, cultural inclinations exert far more influence. We need to acknowledge that no one-size-fits-all approach will succeed in increasing financial literacy for millennials and Gen Z-ers. Both our culture and our own emotions contribute to our financial decision-making, and any instruction must be tailored to recognize and support differences among various ethno-cultural groups and individuals.
In addition to acknowledging your own cultural background, certain traits are labelled for different generations. For example, many claim—with good reason—that Gen Z-ers are tech-dependent. While growing up, using technology has been an integral part of daily routine. On the other hand, some claim that our wariness about the future may be a significant factor in our lack of financial knowledge. For millennials, the stereotypes range from a need for accommodation and flexibility to insistence on knowing the “why” of everything. Although such generalizations do not apply to everyone, nevertheless they may serve to plant certain ideas in our heads. Likewise, different perceptions and treatment of different generations play a large part in our financial conduct. Our own background might seem to be irrelevant in the topic of financial literacy, but it is important to recognize and appreciate all the elements responsible for our behavior to help us understand why we make—or resist making—certain economic decisions.
Our challenge is to respectfully acknowledge our personal and cultural heritage, embrace it, and use it to our advantage to make sound financial decisions. It begins with compassionate self-reflection. Many find the necessary internal examination easier with the help of a professional. Above all, knowledge is key and the ball is in our court.
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Brown, M., Henchoz, C., & Spycher, T. (2018). Culture and financial literacy: Evidence from a within-country language border. Journal of Economic Behavior & Organization, 150, 62–85. doi:10.1016/j.jebo.2018.03.011.
Generation Z Stereotypes: Debunking the Myths of Generation Z. (n.d.). Retrieved August 13, 2020, from https://www.npd.com/wps/portal/npd/us/news/tips-trends-takeaways/guide-to-gen-z-debunking-the-myths-of-our-youngest-generation/
Obe, M. (2017, August 28). In Japan, the lottery is out and investing is in. Nikkei Asian Review. https://asia.nikkei.com/Economy/In-Japan-the-lottery-is-out-and-investing-is-in.