The financial landscape is more complex than ever before. In the past forty years, individuals have increasingly felt compelled to financially prepare themselves for different life stages. Moving from pension systems to employer-backed retirement plans increases the burden on individuals in the US, for example, to understand and prepare for retirement. Alongside this, there has been a surge in new financial products available to everyday investors and, in many cases, a whole new set of financial decisions to make within one’s lifetime. In a world with growing inequality and a rising cost of living, individuals are now navigating a very complex financial landscape.

With many feeling that they face an uncertain financial future, individuals have become interested in investing. Innovations in technology, such as no-fee trading platforms and increased access to financial information via the internet, helped jump-start this trend. While involvement in securities trading (investing in stock, bonds, etc.) has historically in the US and Europe been used by wealthier individuals, markets are beginning to democratize. Many young people now see such investments as a trampoline to grow their wealth.

The World Economic Forum’s Global Retail Investor Survey found that 70% of retail investors are under the age of 45. In China, more than 90% of university-educated citizens from age 22 to 32 say that investing is a key part of their life plan and traditional methods of wealth accumulation, such as real estate ownership, are no longer the most relevant aspect of their financial plans. In India, between 2019 and 2023, over 120 million individuals have become retail investors, with the majority of these investors between the ages of 22 and 35. In Europe, where retail investment has been historically low, the European Commission has put together a plan to empower retail investment for enduring financial resilience.

Globally, young people are excited about retail investing as a way to grow their wealth now, as well as a way to prepare for their financial future.

Involvement in securities markets and other activities, such as retirement planning, budgeting, debt management, etc. hold significant opportunities for economic gain for individuals. But, paired with this excitement, comes the question, have financial institutions and policymakers empowered individuals with the best tools to engage in capital markets?

On the one hand, financial information is more available today than it ever has been before, but it can still be inaccessible and opaque to many individuals. Financial literacy programmes have historically been absent from many school curriculums making it difficult for individuals to build a strong foundation of financial knowledge.

Currently, only 33% of adults globally are financially literate, with financial literacy low in advanced economies with well-developed financial markets. In the United States, only 18.3% of those between the ages of 18 – 34 can correctly answer fundamental questions on financial knowledge. Globally, financial literacy levels, while varying by country, hover at around 35%. Financial information can be jargon-filled, with many individuals citing confusion and unfamiliarity with the stock market as a key reason for not investing.

Without a strong foundation in financial education, investing in the stock market, planning for retirement or managing debt can be difficult to navigate. In recent years there has been an effort to increase access to financial education, from policymakers and financial institutions; this push should continue.

Source

https://www.weforum.org/agenda/2024/05/globally-young-people-are-investing-more-than-ever-but-do-they-have-the-best-tools-to-do-so/