Gen Z Seeks Financial Independence in the Future, But Splurges For Now
Travel > Objects > Events. That’s how Gen Z discretionary spending shakes out, according to a new study from PYMNTS Intelligence. However, Gen Z is also most likely to identify this spending (i.e. “splurging on nonessentials”) as a “financial stressor.”
The research, captured in “New Reality Check: The Paycheck-to-Paycheck Report – Why 60% of Gen Z’s Live Paycheck to Paycheck,” examines the financial habits of consumers of all ages but specifically calls out insights related to Gen Z. This includes “how inflationary pressures and other financial challenges impact younger adults’ ability to gain financial self-reliance.”
It finds, “Insufficient income is the most-cited financial stressor for paycheck-to-paycheck consumers in all age groups.” And while 20% of Millennials and Bridge Millennials say “large amounts of debt” is another “top reason they live paycheck to paycheck,” 34% of Gen Z respondents attribute financial struggle to nonessential spending, with 19% citing the aforementioned splurging.
In fact, says PYMNTS, of all generations, Gen Z “spends the highest share of their monthly income on recreation, leisure and entertainment, as well clothing and accessories.”
So what’s behind this Gen Z spending? PYMNTS posits it may be the availability of discretionary income, since Gen Z “expects to spend just 20% of their income on housing” — far below other generations.
However, this is likely to change as Gen Z ages. Data from the PYMNTS study shows that even though “35% of Gen Z consumers say they live with somebody else and pay no rent, … more than one third expect to move out in the next three years.” Expand that timeframe to five years, and 70% say they’re “at least somewhat likely to do so.”
While Gen Z isn’t necessarily building savings during their period of lower housing costs, there is “evidence that these young adults have their sights set on financial independence,” says PYMNTS. The study outlines the top financial goals of Gen Z as the following:
- Buying a house (15%)
- Setting aside money for emergencies (13%)
- Buying a vehicle (11%)
- Saving for retirement (7.4%)
Even with these goals in mind, Gen Z continues to splurge.
PYMNTS highlights additional Gen Z spending insights from the paycheck-to-paycheck study in a recent article. It reports, “Gen Z is the only age group to be more likely to cite buying an expensive retail product as their top financial goal than to cite paying for an upcoming event or show. … Consumers in this group are seven times as likely to prioritize the former as the latter.” However, the results indicate “one notable exception.” It’s this: “Gen Z is more likely to cite paying for a trip or vacation as their top financial goal than buying an expensive product.”
Here’s why these Gen Z insights are interesting to the financial services industry, as well as other sectors — potential spending power.
PYMNTS says, “By 2030, barely five years from now, Gen Z will represent a third of the workforce. Their disposable income is projected to increase by sevenfold and their spending by sixfold as their incomes rise and they begin to benefit from the $90 trillion transfer of wealth headed their way from parents and grandparents. … For that reason, Gen Z is the generation that all businesses are courting — they are their future workers, customers, business partners and investors.”
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