Generation Z in Peru: Financial Challenges and the Importance of Financial Education

Generation Z faces a complex and challenging financial landscape where they must not only contend with global economic instability but also with the specific circumstances of their situation in Peru. As this generation, which encompasses those born between 1997 and 2009, moves into adulthood, they have been forced to adapt to a drastically changed labor environment due to the COVID-19 pandemic. This context has significantly impacted their ability to find formal employment and stay afloat financially. According to data from Ipsos, 44% of young people in this generation are currently studying, while 41% are working. However, 33% are not engaged in any work or educational activities. This last statistic is alarming as it reflects the precariousness that many young people face in their daily lives. Globally, 46% of Generation Z lives paycheck to paycheck, meaning their income is insufficient to cover their daily expenses. This reality is exacerbated by the fact that 26% of them doubt they will be able to afford a comfortable retirement in the future. The situation in the Peruvian labor market has been even more critical. According to a report from the International Labour Organization, the economic recession caused by the pandemic disproportionately affected young people aged 14 to 24, who experienced the largest drop in employment. This context of high informality and low productivity has left many of them with no viable options to improve their quality of life. Despite a slight recovery in employment, most young people have been forced to accept jobs in small companies that do not offer the benefits or stability they require. Inflation has also been a determining factor affecting Generation Z's personal economy. Over the past three years, price increases have been notable, reaching 8.46% in 2022 and 6.43% in 2021. These increases have made it difficult for young people to manage the new living costs associated with family independence, such as rent, basic services, and food. This is particularly problematic when wages have not risen in line with inflation, leaving many in a state of financial vulnerability. Additionally, inexperience in managing personal finances poses a challenge for many of these young people. They often find themselves facing their first salaries without proper financial education to help them make informed decisions. According to Zach Teutsch, a finance specialist, Generation Z tends to spend on small daily pleasures, such as coffee or subscriptions to digital platforms, which can lead to a significant portion of their income being wasted on unnecessary expenses. Nevertheless, amid these challenges, there is a glimmer of hope. There are strategies and resources that can assist Generation Z in managing their finances more effectively. Financial education is key for them to navigate this complicated landscape. It is essential that young people seek to learn about saving, investing, and debt management, not only to survive in the present but also to build a more stable future. Practical advice that can help members of this generation includes creating a realistic budget that considers all their expenses and savings, establishing an emergency fund for unforeseen circumstances, and seeking long-term investment opportunities, even if they are small. It is also crucial to encourage open dialogue with family and friends about finances, which can provide a support base and knowledge. Technology, which has been a constant ally for Generation Z, can play an important role in managing their finances. There are numerous apps and platforms that facilitate tracking expenses, savings, and investments. However, the use of these tools must be accompanied by a responsible and disciplined mindset; otherwise, they may become a trap rather than a solution. In conclusion, although the financial challenges facing Generation Z are significant and different from those of previous generations, there is room for hope. With proper financial education, discipline, and the smart use of technology, these young people can build a path toward economic stability and long-term well-being. The key lies in learning from experience and adapting to a constantly changing world. While the road is difficult, it is not impossible; and each step toward better management of their personal finances is a step toward a more promising future.