When it comes to money, no one’s having an easy time right now, but are some generations navigating the chaos better than others? Gen Z came of age during economic instability, record inflation and the explosion of buy now, pay later debt. Many millennials hit adulthood during the Great Recession and are now managing careers, kids and rising costs in tandem. Both groups are under pressure.
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Data from the 2025 TIAA Institute-GFLEC Personal Finance Index shows both of those generations are falling short when it comes to financial literacy, but Gen Z is in a more precarious position. While neither generation has mastered money management, there are clear differences in knowledge gaps, risk comprehension and day-to-day financial pressure.
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Financial Literacy Scores Tell a Clear Story
The study found that the average U.S. adult scored 49% on the 2025 P-Fin Index, which consists of 28 questions on financial literacy. Gen Z, however, came in at just 38%, the lowest of all generations. Millennials (referred to as Gen Y in the index) fared a bit better at 46%. That gap may not sound huge, but it’s meaningful, especially when viewed alongside financial outcomes.
The index tests eight core financial functions, including borrowing, saving, insuring and comprehending risk. Gen Z scored lowest in every area, and their weakest spot was insurance, where they fell far behind older cohorts.
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The Financial Consequences Are Already Showing
Gen Z holds more personal debt than any other generation at $94,101 on average, according to Newsweek. That’s much higher than millennials, who average $59,181. Over half of Gen Z respondents said debt is on their minds most or all of the time.
Yet only 23% of Gen Z in the P-Fin Index say they’re “debt-constrained,” meaning their payments stop them from covering other financial priorities. For millennials, that figure is 39%. The gap may reflect timing, as Gen Z is younger and may not yet face the same financial pressures.
But the warning signs are there. The TIAA data showed that 41% of Gen Z couldn’t cover a $2,000 emergency, compared with 30% of millennials. Low savings and high debt rarely end well, and Gen Z is already on the back foot.
Functional Knowledge Isn’t Catching Up Fast Enough
The data shows that financial knowledge doesn’t necessarily improve with age, especially when it comes to risk. But Gen Z is underperforming across the board, failing to keep up even in areas where experience should help, like saving and budgeting.
Millennials may not be in top shape either, but they’re edging ahead. Their slightly better understanding of core financial concepts could mean more stable outcomes over time, especially if the knowledge gap keeps growing.
The Outlook for Both Generations
Both groups have work to do. Financial education isn’t widely taught in schools or workplaces, so the burden falls on individuals to build up knowledge, and fast. That means getting clear on how compound interest works, understanding loan terms, building emergency savings and knowing what financial products cost over time. Free resources exist, including nonprofit credit counselors, online literacy programs and community finance workshops.
Gen Z may be starting further behind, but with the right habits, the gap isn’t permanent. What matters now is who takes action.
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This article originally appeared on GOBankingRates.com: Millennials vs. Gen Z: Who’s More Financially Prepared for the Future?
