Generation Z’s economic precariousness and pessimism is often listed as a defining characteristic of those born between 1995 and 2012. A recent study by credit reporting agency TransUnion adds context to this definition (and pessimism), comparing Gen Z’s situation to that of millennials (born between 1980 and 1994) when they were also between 22 and 24 years old.
Gen Z is more credit-intensive than millennials were ten years ago. So far, so good. The first problem: they also have higher levels of credit delinquency, although the study clarifies that delinquency is higher for all ages. Today's young people, in second place, are more indebted than they were a decade ago. In fact, they form the age group with the highest debt.
"Even after adjusting for inflation, Gen Z consumers earn less, have less income after debt payments, have higher debt across products and higher debt-to income ratios, and perform worse compared to their Millennial counterparts," the study says.
Rising food and housing prices, in addition to an increase in the number of student loans, are the main causes behind the rise in debt among Gen Z, according to a Wall Street Journal report. In short: Bidenflation.
"Gen Z consumers have seen their finances significantly impacted by the pandemic and its aftermath, even more so than the challenges faced by Millennials as a result of the Global Financial Crisis," argued Michele Raneri, an analyst at TransUnion. Gen Z and millennials themselves agree: while 75% of the former say their finances were negatively impacted by the pandemic recession, 60% of the latter felt the same way about the 2008 crisis.
The pessimistic generation
This negativity is well documented: 12% of Gen Z considered themselves unhappy or somewhat unhappy in the latest World Happiness Report. Sixteen percent said they were neither happy nor unhappy, while 48% reported being "somewhat happy." A study by Gallup and the Walton Family Foundation Voices also found that nearly half are often anxious, while one in five said they often suffer from depression.
Although the analysis recognizes the weight of financial security in this desolate introspection, it gives greater importance to factors such as hours of sleep and motivation at work or school.
When thinking about the future, they see few signs of improvement. Sixteen percent believe they will not be able to retire, while 34% think they will never be able to buy their own home. This was revealed by a study by consulting firm McKinsey on Generation Z, which also reported "alarming levels of negativity about themselves, their confidence in the future, and their ability to find contentment in American life."
Some analyses suggest that this lack of future expectations discourages savings. Spending is immediate, with no reserve for medium- or long-term goals. Nearly three-quarters of Generation Z maintained late last year that the economic situation made them hesitant to set long-term goals, according to a report by Intuit, shared by CNBC.
Consumers under 35 account for 53% of "buy now, pay later" purchases, according to a LexisNexis Risk Solutions study, as reported by NBC News. These types of purchases, coupled with the increasing ease of purchasing products via the internet, increase the risk of non-payment.
Adjectives that define a generation
The consulting firm McKinsey baptized them as "always-on purchasers." Their purchase frequency is not monthly or weekly, it is constant. They make anytime purchases through always-on channels such as social media, and all the time, with subscriptions to services such as Netflix and Spotify.
Accordingly, they also want to take advantage of "all formats." They click "buy" either on their phones, after seeing an advertisement on social media, or on the website of a brand they accessed on their computer, or they go to a shopping mall to try on those shoes they have their eyebrows on.
The Economist describes them as shoppers with "thin wallets and expensive tastes." Categories like wellness and luxury seem essential to them. The average Generation Z shopper makes their first luxury purchase at age 15, according to an analysis reported by the same media outlet. Millennials did so four years later on average.
Those behaviors also reveal a shift in values, according to financial software company Intuit. "Quality of life is key for Gen Z, even more than financial or physical health," explains a report from last year. In fact, work-life balance is followed by the ability to practice hobbies, solo activities and romantic relationships.
Financial wellness is listed 10th.
