Despite a stronger-than-expected economy throughout much of 2023, Gen Z hasn’t taken advantage of it to secure their financial future. 50% say their focus is on short-term gratification instead of long-term financial stability.
A recent study by Clever Real Estate tracked this generation’s tendency to spend now instead of save for later and found that overspending and undersaving were the foundational principles of Gen Z finances.
Gen Z Prone To Splurge
No generation overspends more than Gen Z. Around 87% of Gen Z respondents confess to overspending. 86% of millennials admit the same. Nearly one in five Zoomers (19%) claim they purchase items weekly that end up unused. More than half of the generation (51%) reports they pay for subscriptions they don’t use.
Despite these findings, overspending isn’t limited to younger Americans. Nearly three-quarters of all respondents (74%) admit to the ill-advised behavior. The United States’ overspending problem is so pervasive that a third of those surveyed said maintaining their current lifestyles costs them more than they earn. These costly habits comprise what the Federal Reserve estimates to be $1.129 trillion in Americans’ overall credit card debt, a fiscal burden that prevents many consumers from meeting long-term financial goals like homebuying or saving for retirement.
Many Zoomers Mismanage Finances
Gen Z has high financial expectations; college students surveyed by Clever in 2023 expected to make nearly $85,000 annually just one year after graduating. However, the U.S. Department of Labor indicates the average American’s salary in the last quarter of 2023 was just under $59,400. Considering that young workers at the start of their careers and other entry-level employees often earn less, it’s clear why Gen Z struggles to afford their lifestyle.
More than half of Gen Z (53%) say their lifestyle costs more than they earn, compared to just 13% of boomers. Meanwhile, a third of Gen Z (34%) buy themselves unnecessary treats at least once a week. Half of Gen Z admit they buy things just because they’re on sale, even if they have no plan for them.
Bola Sokunbi, founder and CEO of Clever Girl Finance, thinks this knee-jerk spending endangers any chance of Gen Z getting and staying on track financially. “Instead of justifying unnecessary purchases with ‘I deserve it’ or ‘I’ll treat myself,’ it’s important to be intentional about adopting a more mindful approach to spending,” Sokunbi says.
Members of Gen Z aren’t oblivious to the financial issues affecting them. Twenty-seven percent say they are embarrassed to talk to their partner about their spending, while 40% admit that their spending habits impact their life goals.
Setting small, measurable, attainable, and realistic goals is the first step to changing bad spending habits. “Setting goals will help you stay focused on the big picture of what you’d like to achieve with your finances,” Sokunbi explains. “By making these intentional changes, young people can take control of their finances and work towards a more secure future.”
Gen Z Faces the Future
While Fortune reports millennial and Gen Z’s overall net worth has grown around 80% due to generational wealth — older relatives selling a house or coming into an inheritance or trust — many in these generations anticipate a tumultuous financial journey.
Though millennials and Gen Z participate in irresponsible spending, around 36% of Gen Z respondents believe their financial woes are beyond their control. Though younger generations’ financial stability and confidence remain affected by inflation, student debt, and sky-high rent costs, Gen Z and millennials’ ability to adopt and exercise healthy spending habits and effective budgeting techniques can positively impact the group’s financial burdens.
Sokunbi offers a clear path for Gen Z to make some changes moving forward. “My advice to young people is first, to create a budget. This is you telling your money what to do. Next, track your expenses in detail. Are there areas you can cut back on temporarily or permanently?”
Whether it’s youthful financial inexperience or core differences in their philosophy about money, it’s clear Gen Z spends very differently than other age groups, which could have a significant economic and societal impact in the years to come.
This article was produced by Media Decision and syndicated by Wealth of Geeks.