Yahoo Finance What’s Stopping Gen Z and Millennials From Saving More? Many Blame This Habit
Inflation, soaring credit card debt and stagnant wages have made it nearly impossible for many families to save sufficiently over the last few years. But others see their savings fall flat not because of outside economic forces beyond their control, but because they can’t get out of their own way and stop stumbling over bad spending habits.
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A new GOBankingRates study of more than 1,000 people found that young, and even young-ish adults are shopping their way into a state of financial precarity.
Here’s a look at what they’re up against and how they can reclaim their financial destinies.
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When asked about the biggest roadblocks to saving, about 13% of the study’s respondents said they were doing just fine and not encountering any major obstacles. Among the 87% who weren’t sailing so smoothly, the biggest challenge by far was insufficient earnings — nearly 4 in 10 said they don’t make enough money to save enough money.
The next biggest hurdle was exorbitant bills, which are keeping 22% from reaching their savings goals. From there, it dropped by half to 11% or so who are stymied by debt or impulse shopping and a much smaller 4% who are suffering from a lack of financial education.
But when broken down by age, a clear demographic shift emerges.
Across all age groups, insufficient income and expensive bills retain the No. 1 and 2 spots. But more than 20% of 18- to 24-year-olds and nearly 15% of 25- to 34-year-olds cite their tendency to impulse shop as the biggest roadblock to saving money.
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Young People Are Wired To Act — and Buy — Without Thinking
Anyone with a teenager in their life doesn’t need science to explain that young people aren’t exactly experts in consequence-based deliberation and decision-making — but science can help explain why.
Research shows that adolescents are more likely to act on impulse because they can’t access the parts of their brains that control judgment and decision-making — their frontal and prefrontal cortexes — as readily as adults. Those regions don’t fully develop until 25, which means nearly all of Gen Z is at least partially wired for buying without thinking just as they’re getting their first taste of financial freedom.
Nature Plays a Supporting Role, but Modern Consumer Culture Is the Lead Actor
The youngest adults are at war with their still-developing brains, which is part of why they’ve been prone to reckless spending for as long as money has been changing hands — but there’s more to the story than biological wiring.
“Impulse shopping has always presented a challenge to young adults, who may be enjoying spending power for the first time,” said Brittany Pederson, director of deposits and payments for Georgia’s Own Credit Union, the second-largest credit union in Georgia. “However, Gen Z and young millennials, in particular, face the challenges of incredibly savvy target marketing, social media influencers and ads, coupled with the incredible ease in payment technology. When a product that seems perfect for you shows up in your feed and can be purchased within seconds and possibly arrive the next day, it requires quite a bit of discipline to keep on scrolling.”
The 18-34 Demo Has Always Had the Ad World’s Bullseye on Its Back
Only the youngest adults can blame the remnants of their adolescent brains for reckless spending, but the entire age range is the most coveted demographic among advertisers and has been for decades. Marketers target 18- to 34-year-olds because they’re the largest cohort of the population, they’re most receptive to trying new brands and products, they have the most disposable income and they are beginning to develop lifelong brand loyalty.
It’s been that way throughout the modern advertising era, but today’s young have virtually no reprieve from the temptation to buy.
They Never Knew a World Without Digital Bombardment
Marketers targeted the 18-34 demo in the analog era long before their ads followed people wherever they went on their smartphones. But the intensity, frequency and personalization of those ads are simply not comparable to the billboard, magazine and TV marketing campaigns of the past — and today’s 18- to 34-year-olds have never known anything else.
“Gen Z and younger millennials like us grew up in the age of the internet, where ads and shopping opportunities are just a click away,” said Akeiva Ellis, CFP and expert contributor to Annuity.org. “From Facebook ads to TikTok Shop, you can’t even scroll through social media without seeing something tempting to buy, right? It’s so easy to fall into the trap of impulse spending when we’re surrounded by online shopping’s convenience and instant gratification. The concept of delayed gratification, which encourages thoughtful, long-term planning, seems to be fading as the pace of life accelerates.
“This culture of instant results can make impulse spending even more tempting,” Ellis continued. “It’s not that young folks are necessarily more susceptible to consumer culture. It’s just that today’s world serves up shopping temptations faster than ever before.”
E-Commerce: The Intersection of Temptation and Accessibility
The modern, tailor-made digital ad that follows you from your email to your news feed to your invoicing software would be hard enough to resist if you had to drive to a store to buy whatever it is they’re selling. But when you can buy with a click and stretch out the payment with BNPL (buy now, pay later), willpower doesn’t stand a chance.
“As a young millennial myself, I’d say online shopping is likely worsening impulse spending for younger generations,” said Bethany Hickey, a personal finance expert with Finder. “If I want something, it’ll take me less than five minutes to find it online and buy it. I think it has less to do with being reckless or a victim of consumerism and more to do with the pure convenience and speed of online shopping. Think of all the steps involved in buying something in person — getting dressed, driving to the store, finding something to buy, holding it in your hands, then actually going to a cash register and paying. None of those steps exist online, and the speed of it all doesn’t even give you a chance to stop and think.”
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Social Media Isolates Young People and Relentlessly Tempts Them To Buy
Blake Mischley, founder of the college social network MeetYourClass, is a Gen Z entrepreneur who built his business on his knowledge of how social media influences financial decisions among his peers.
He sees a direct connection between time spent online, mental health and purchasing patterns.
“Today’s young generation, particularly Gen Z, is bombarded with tailored ads on social platforms, creating an amplified urge to shop,” said Mischley. “The high rates of social isolation, with nearly 73% of Gen Z experiencing it, can translate into seeking temporary relief through impulse purchases. While every generation has its spending vices, the combination of targeted digital advertising and the mental health challenges faced by today’s youth intensifies the pull toward consumerism. Understanding these nuances is crucial to addressing the underlying causes and offering genuine solutions.”
Rein It In and Shop With Purpose
Young adults have money, credit, no parental supervision, impulse-control issues and the advertising industry’s complete attention. Challenging as it is, only they can set limits and steer money away from Amazon and toward their savings accounts.
“Implement a waiting period,” said Kendall Meade, certified financial planner at SoFi. “This can be 24 hours for smaller purchases or up to a month for larger purchases. This allows you to think over the purchase and make sure you really want or need it. In the meantime, you can see if there is a better deal out there, too.”
Meade also recommends removing the ever-present digital temptation wherever you can.
“Unsubscribe from shopping emails,” she said. “Unfollow social media accounts that promote shopping hauls, products, etc. Remove shopping apps from your phone and/or remove your credit card. This puts a little bit of friction between you and making the purchase, which gives you time to think about if you really need the item.”
Finally, consider shopping with cash.
“Studies have shown that you are likely to spend less if using cash versus a credit card because it is more painful to hand over the cash than to swipe your card,” said Meade.
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This article originally appeared on GOBankingRates.com: What’s Stopping Gen Z and Millennials From Saving More? Many Blame This Habit
