What we’re seeing is a major health issue that’s converging social, cultural and economic factors. Buying all of these goods, luxury or not, is not an indication of Gen Z’s expedient or exorbitant wealth but rather a manifestation of our dire need to boost self-esteem and a sense of belonging in society.
Surrounded by influencer culture, TikTok shopping hauls and “viral” products, we’ve normalized heavy spending as a tool for self-expression and relationship-building, or at least the illusion of it. This phenomenon is called emotional spending; it affects 59% of Gen Z, more than any other generation. But underneath the aspirational content and illusion of control enabled by emotional spending, there’s a missing sense of what “value” means or holds for the long term.
Buy now, pay later is not helping
It seems that bleak hopes of traditional financial success mixed with commerce-driven rapid dopamine hits have conspired to create a fundamentally different view of financial security trade-offs than past generations. One of the prevailing data points coming out of this year’s Black Friday is the use of Buy Now Pay Later (BNPL) platforms.
It’s not a coincidence that the rapid emersion of this technology coincides with Gen Z’s adulthood. Last year at this time, 48% of Gen Z said that they planned to use BNPL services for the 2022 holiday season, compared to only 14% of Baby Boomers. Alarmingly, Gen Z respondents are exceeding other generational cohorts in two troubling categories, with more than half of Gen Z having missed at least one BNPL payment, while also nearly tripling their overall debt load in the past two years.
When asked about their rationale, 73% of Gen Zers said they prefer a better quality of life rather than extra money in the bank. As a result of excessive discretionary spending, nearly 33% of Gen Z workers have saved nothing for retirement in the last two years.
To be clear, it’s not that we can’t see beyond the present tense, but we’re not saving for it. Maybe because quality of life is a metric best felt in the now. Maybe because we’re not sure that day will ever come.
So where does Gen Z go from here?
Many days it feels we’ve been left with the Sisyphean task of choosing between self-care splurges and making financially sound decisions in this uncertain world. Short-term spending has become our coping mechanism; it’s a celebration of what we’ve been able to accomplish so far, a shield to fight off emotional lows and a currency for social acceptance. But it’s time to wave the flag—we need to reset our relationship with money.
Like so many of the systems Gen Z has already disrupted, we’re fighting for change here too even if it means simply asking for help. Surprising to some, Gen Z really wants to learn more about personal finance and how to improve their financial well-being. 43% of Gen Z and millennials recognize the need to be more proactive about financial planning, and 79% of Gen Z “would like to see brands offer more education or courses on personal finance.”
