There’s a global surge of young retail investors participating in the financial markets. According to the World Economic Forum, 70% of these individuals are under age 45. These findings indicate a lower barrier to entry thanks to tools like online investment platforms. However, a problematic trend has emerged among young investors.

According to the Global Financial Literacy Excellence Center (GFLEC), financial knowledge among this population hovers below 50%. This sobering stat demonstrates a pressing need to equip them with the right tools to make wise investment decisions. With the proper educational resources, they can protect their financial futures.

A Generational Shift in Investing

Younger demographics have embraced investing like never before. Factors such as user-friendly platforms, widespread internet access, and mobile trading apps have made entry into financial markets more accessible. In regions like India, retail investors have significantly influenced stock market growth, while in the U.S., Europe, and China, younger investors are embracing opportunities to build early.

Financial Decisions Get More Personal

Over the last four decades, there’s been a major shift in how people manage their financial well-being. For instance, a generation ago, employees relied on traditional pension plans. Nowadays, employer-backed retirement plans are a favored option. 

Additionally, the growing variety of financial products has complicated personal financial management. For example, Contract for Differences (CFDs) is a popular form of trading requiring a nominal upfront investment. However, it’s risky, and young investors shouldn’t enter into this “buyer-seller” agreement without educating themselves using CFD educational materials.

The Benefits of Financial Education

Money management skills offer clear advantages. This education empowers individuals to manage debt, save for retirement, and achieve higher investment returns. For example, they can learn to diversify their money across stocks, bonds, and mutual funds. The strategy reduces risk and optimizes returns, even in fluctuating markets.

Moreover, financially literate individuals are less likely to fall prey to high-interest borrowing or risky investments, such as trading complex derivatives. They also make financial decisions that can lead to long-term stability.

Obstacles to Better Money Management

Financial education remains inaccessible for many. In schools, financial literacy is rarely a core component of the curriculum. The investing and financial management content available outside of formal education is often riddled with excessive jargon, leaving people confused, overwhelmed, and frustrated. Given these factors, it’s no wonder less than 50% of adults worldwide are considered financially illiterate.

Collaborative Efforts to Build Financial Awareness

Financial illiteracy is a multifaceted problem requiring a multi-stakeholder solution. Policymakers, educators, financial institutions, and technology innovators all have a role to play. Schools should incorporate financial education early to help children develop habits that promote sound financial decision-making. Employers can also contribute by offering workshops and training sessions. 

Who says learning about finances can’t be fun? Apps and tools can gamify financial education in a way that engages users. Platforms like YouTube and podcasts can deliver money-related content that resonates with a wider audience. With these outlets, users must also receive unbiased, accurate information. Meanwhile, banks and brokerages are embedding educational models within their platforms to provide just-in-time learning for users.

Time for a Brighter Financial Future

The rise of young retail investors represents a unique opportunity to strengthen global fiscal competence. Education in schools, workplaces, and online spaces can empower individuals to understand the risks and make informed decisions.

Young investors can secure their financial futures. They have an opportunity to build a foundation for lasting wealth, and it all starts with having the right tools, knowledge, and resources.