Gen Z spending habits: Are they really higher than before?

Gen Z, those born between 1997 and 2012, are stepping into adulthood during a unique economic climate. With the cost of living on the rise, stagnant wages, and unprecedented global events like the COVID-19 pandemic, this generation is navigating financial waters that are much different than those faced by millennials or Gen X.

Recent data suggests that Gen Z’s spending habits are indeed different compared to previous generations at their age. However, higher spending doesn't necessarily mean reckless spending. Gen Z is known for their value-driven approach; they prefer spending on experiences rather than material goods, and they are more inclined toward brands that align with their values, such as sustainability and social responsibility.

Still, there is a perception that they are spending more frivolously on things like daily coffees, eating out, and digital subscriptions. A study by Bankrate found that 54% of Gen Zers admit to making at least one impulse purchase per week, compared to 49% of millennials and 33% of Gen Xers.

One of the most cited examples of Gen Z's spending habits is their penchant for buying a £5 coffee daily. While this might seem trivial, it adds up. Over time, these small expenses can significantly impact their ability to save for a deposit on a house.

But is this really the whole story? Many financial experts argue that it’s not the £5 coffee or similar small expenses that are preventing homeownership. The larger issues at play are skyrocketing home prices, higher interest rates, and increased student debt burdens. Despite their frugality in some areas, the financial hurdles Gen Z faces are vastly different from those faced by their parents or grandparents.

Moreover, homeownership might not be the ultimate financial goal for every Gen Zer. Many are choosing to delay or forgo buying a house, instead prioritising flexibility, experiences, and investments in the stock market or cryptocurrencies. For a generation raised during the Great Recession and entering adulthood amidst a pandemic, a fixed asset like a house might seem less appealing than having financial liquidity and mobility.

Gen Z's unique spending habits are reshaping the consumer landscape. Brands are paying close attention to this generation’s preferences and behaviours, which are largely driven by a blend of social consciousness, digital savviness, and a desire for authenticity.

Gen Z is less likely to be loyal to a single brand and more likely to make purchases based on value and ethics. Companies with strong environmental policies, fair labour practices, and transparent supply chains are more likely to win their wallets. This generation has also grown up with technology at their fingertips, and they expect seamless digital experiences. From online shopping to virtual reality, brands are investing heavily in digital strategies to attract Gen Z customers.

Gen Z expects a personalised experience in both online and offline interactions. Brands that can tailor their offerings and communication to individual preferences stand to gain significantly from this group. Traditional advertising is less effective with Gen Z. They rely heavily on influencers, peer reviews, and social proof to make purchasing decisions. As a result, brands are shifting their marketing budgets from traditional media to social platforms like TikTok and Instagram.

While Gen Z might be spending differently than previous generations, they are also facing unique financial challenges. The narrative that small daily expenses are the main barrier to homeownership overlooks the broader economic context. As for brands, understanding and adapting to the evolving preferences of this powerful consumer group is crucial for future success.