The Taiwan Banker

When I was teaching a macroeconomics course, I asked my students if they invested in foreign currencies. “Will you buy US dollars? Or mainly Japanese yen?" I didn’t expect them to answer Bitcoin and Ethereum. This financial innovation not found in monetary and banking textbooks has become normal for today's college students. These youths, known as Gen Z, are the worst victims of the collapse of FTX, the world’s second-largest cryptocurrency exchange. Studies have shown that because they distrust the financial system following the financial turmoil of their parents, especially in the US, many young investors focus on decentralized cryptocurrencies. 26% of Gen Z has invested in stocks, but 23% have invested in virtual currencies. Because of this, the collapse of the virtual currencies has also worried the US financial industry, and related effects may ripple across several generations, inhibiting investing for some time. In fact, observing Japan’s experience, we also see that investment losses hindered investment market development for generations. Because Japan’s Gen X and Y grew up in a 30-year period of low growth after the collapse of the stock market bubble, cash become king. Despite the long-term negative real deposit rates, preferences for cash holdings proved difficult to dislodge, so people lost interest in stock market and housing investment. This even affected the growth of electronic payments. Therefore, to maintain the sound development of Taiwan’s financial market, we should start caring more about the financial attitude and environment of Gen Z. According to the Survey on the Financial Outlook of College Students conducted by TABF, 40% of young people, known as “digital natives,” have already started investing. More than half of them however feel that they don’t know much about finance, or even don’t understand it at all. Even though fewer of Taiwan’s Gen Z invest in virtual assets than in the US, almost 7% have. Adding in the intense volatility of the Taiwan stock index, it can be inferred that no small number of novices have been burnt this year, and Gen Z needs assistance to rebuild its confidence in investment. Interestingly, the survey also found that discussing financial issues with one’s parents has a very positive relationship with financial knowledge. Whether it involves successful or failed investment experience, exchange of knowledge helpful for learning. After all, the internet may not necessarily be full of false information, but it is inherently easy to start rumors online. If a large portion of Gen Z’s financial knowledge comes from filter bubbles and information pushed by bots, the chance of being misled has increased significantly. It is urgent to cultivate their ability to judge the authenticity of online information, which requires cooperation from the government, schools and financial institutions. Today’s youth will one day become the main contributors to the market, and promotion of financial knowledge is the key to building future markets. Credit card debt once frightened a generation of young people in Taiwan. We do not want this to happen again. All walks of life should join hands to disseminate financial knowledge between generations. TABF is preparing to start this process, and invites all schools and companies to participate.