Spending Dips 13% As Gen Z Makes Saving ‘Cool’

For younger Americans in the Generation Z cohort, spending is out, while saving is reportedly in.

That’s according to a report Tuesday (June 24) by the Wall Street Journal (WSJ), citing data from market research firm Circana showing that in-store and eCommerce purchases by 18- to 24-year-olds had declined 13% year-over-year between January and April.

Driving this trend, the report said, is a combination of factors: a tough job market for younger graduates, the resumption of student loan payments, and rising credit card delinquencies.

“This group is struggling more than older cohorts,” said Wells Fargo Economist Shannon Grein.

The report noted that while it’s normal for every generation to struggle at first, younger consumers typically have fewer big financial obligations and more disposable income.

“It sucks for now,” Grein said. “But since younger consumers are not only spending less today but also probably saving less, that could dent their ability to build wealth in the future.”

Against this backdrop, the WSJ said, Gen Z has been focused on thrift. Spending less on things like clothing or manicures has become “cool,” the report added, with some younger consumers finding ways to enjoy themselves without spending too much.

Among them is Himanshu Wagh, a 25-year-old psychiatry resident who frequents high-end furniture sellers for a free place to hang out.

“We sit on the sofas and when the conversation gets boring, we move to a different sofa,” Wagh said. “We feel rich drinking their free coffee and enjoying this bougie furniture we can’t afford.”

Research by PYMNTS Intelligence into Gen Z shopping patterns finds that these consumers, when they do decide to spend, often prefer installment plans, used by 45% of the shoppers in this age group.

“With a bit of granular insight into the types of installment offerings this subset of consumers prefers, Gen Z mostly uses those offered by merchants or third parties, at 30%, while 15% use plans offered by the card issuers,” PYMNTS wrote recently.

Members of Gen Z also tend to fall into the “reactor” group when it comes to financial management strategies, handling bills as they arise and frequently relying on credit.

Research from “The Financial Management Divide: Planners vs. Reactors” shows that 73% of Gen Z consumers are reactors.

That’s opposed to people in the “planner” group, who take “a strategic, proactive approach to managing their cash flow, often avoiding reliance on credit,” an additional PYMNTS report said.