Let’s get straight to the point: Gen Z hasn’t had it easy over the last few years. Their formative years are being shaped by a global pandemic, climate disasters, wars, and now, to top it all off, a cost-of-living crisis. It’s hard out there.
2023 saw these young adults struggling to pay for necessities, let alone luxuries. Students were wary of their outgoings and many were concerned about their futures, long-term careers, the housing markets… we could go on.
But now, it’s 2024. Rising inflation is still a worry, but young people aren’t backing down. Yes, they’re still struggling to pay rent and the idea of buying a house is a distant dream, but the rising prices of everyday items isn’t putting them off. Their income may not be disposable, but they’re certainly starting to consider it so…
Thanks to savings and loans, young people refuse to sit back and watch the world pass them by.
In this Ultimate guide to Gen Z and the cost-of-living, we’ll be answering key questions: Is Gen Z struggling financially? How are their spending habits impacted? And how can you continue to engage Gen Z and capture their purchasing power amidst a culture of high inflation? We’ll also be diving into the data and hearing directly from your target audience: Gen Z.
Is Gen Z financially savvy?
In short, yes and no.
The mindset of a Gen Zer is never straightforward, and this makes predicting their spending habits… tricky, to say the least. But what do we know about their financial habits, and how is their awareness impacting their relationship with brands?
Well, this generation’s interest in personal finances is certainly on the rise - just take a look at the finfluencers (financial influencers) taking over TikTok feeds, and the growing interest in financial advice apps, such as Cleo and Financielle. These are apps designed for Gen Z, and they have the social media profiles to match.
So why the increased interest? Well, in order to spend freely, Gen Z wants to be informed. They want to stand on their own two feet. Plus, this is information many aren’t taught at school or college.
Although, with credit cards and Buy Now Pay Later schemes on offer, it’s a slippery slope…
So how are Gen Z financing their lifestyles?
- 77% of Gen Z are currently utilizing some form of credit/financing agreement
- 67% of Gen Z were not aware that BNPL can have a negative impact on their credit score even if they pay on time
- 54% of Gen Z are making additional income doing odd jobs and selling items on resale sites
This then leads to the f*ck it attitude that we’re increasingly seeing. To quote one TikToker: ‘Money comes and goes but you’ll never be in your 20s again screaming to SZA with your besties.’
Huge financial goals that older generations experienced, whether that be getting a mortgage or buying a car, are so wildly out of reach for Gen Z, that they’re instead deciding to spend their cash on things they want, whether that’s a city break or a new pair of jeans.
How is the cost-of-living impacting Gen Z?
We know that some young people are adopting a ‘f*ck it’ attitude to spending (fair enough, it’s been a hard few years), but how are they really feeling?
Having a deeper understanding of Gen Z’s attitudes towards their finances and the state of inflation will help brands and marketers to prepare for the future and craft campaigns in a considerate and sensitive manner: after all, we don’t want to encourage any reckless spending!
Check out some key stats below:
- 97% of students feel like they’re struggling more with the cost of living than people think
- 45% of students look for discounts every single time they make a purchase
- 41% will reduce their utilities to keep bills low
- 35% will have to spend money from their savings
- 25% will have to ask friends and family for financial support
Stats from 2023 survey of users of Pion’s discount marketplace, Student Beans
And it’s impacting their futures too…
Financial uncertainty is taking away Gen Z’s confidence when it comes to their career choices - after all, ‘dream careers’ don’t always pay the big bucks…
Research from LADBible and The Prince’s Trust revealed that Gen Zers are no longer prioritizing their dream jobs due to the pressures of rising inflation, with almost two-thirds of survey respondents agreeing that the cost-of-living crisis was having the biggest impact on their futures.
Financial considerations are taking over their lives, with their long-term life milestones being waylaid due to future financial concerns: financial stability and independence reign supreme.
It makes for pretty bleak reading. They deserve a little treat or two…
Gen Z spending habits
So how exactly is the cost of living impacting Gen Z’s spending? In this section, we’ll be geographically diving into the data, sector by sector.
US sector breakdown
Fashion
Skyhigh inflation rates won’t prevent student shoppers in the US from splurging on fashion, with transactions increasing near-consistently throughout 2023 compared to 2022.
Nonetheless, average order value (AOV) was down for a lot of 2023 compared to the previous year, meaning that shoppers were making more purchases, but for the most part, at a lower expense.
What does this mean for brands?
Interestingly, AOV was down in the US from September to December - often the busiest time of the year due to the back to school season, Black Friday, and the festive period. This suggests that fashion isn’t this generation’s number one priority, unlike other sectors.
US average basket spend in 2023: $87.64
Technology and mobile
The tech and mobile world is huge for Gen Z students - after all, their entire lives are online! But it’s a pricey sector, and this was reflected in their spending habits over recent years.
Whilst AOV was down throughout the majority of 2023 amongst US students, October, November, and December saw an increase in spending, which suggests that students were taking advantage of BFCM’s tech deals.
What does this mean for brands?
This is certainly a spending trend for tech and mobile brands to be aware of when wanting to capture students’ spending: ensuring your back to school campaigns are in full swing by late summer is the key to success!
US average basket spend in 2023: $278.23
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Health and beauty
Given that young people are cutting down on luxuries thanks to high inflation, it’s interesting to see that transaction numbers in the US increased from 2022 to 2023. Clearly, the health and beauty industry is viewed as a necessity for many young people. But with social media driving the wellness and beauty industry with astronomical force, this is hardly surprising: from glass skin to sultry-bushy brows, beauty trends come and go at a constant rate.
What does this mean for brands?
This is something for health and beauty brands to bear in mind when we head towards the future: with strong competition in the sector, brands need to work harder than ever before to capture the spend of these young shoppers.
US average basket spend in 2023: $88.07
Travel
2024 is the year of travel for Gen Z. It’s the year of embracing cheap, last-minute breaks and planning longer, adventurous getaways. But how is this changing their spending habits?
To put it simply, this is an industry on the up. Transaction numbers amongst US students in 203 were up compared to the year before, peaking around the Spring Break season. Interestingly, AOV simultaneously dropped amongst US students - they’re always on the lookout for cheap, cheerful holidays to get them away from everyday life!
What does this mean for brands?
Looking forward, travel brands need to focus their campaigns around key spending periods, including Spring Break, summer, and the festive season.
US average basket spend in 2023: $158.14
Food and drink
With young people returning to their college and university cities towards the end of the summer period, it’s unsurprising that their takeaways, dining out, and coffee habits rose dramatically during this period. This was also reflected in the AOV data in the US, with the latter half of 2023 seeing an increase compared to 2022
What does this mean for brands?
For food and drink brands wanting to target students, the back to school season and post-Christmas period is the most effective time to do so Students will want to spend time catching up with friends over good food or a coffee, and they’ll be in need of a student discount to support them!
US average basket spend in 2023: $88.18
UK sector breakdown
Fashion
A rising cost of living won’t prevent student shoppers from splurging on fashion, as proven by 2023’s increasing AOV.
Interestingly, transactions were down for the majority of last year compared to 2022, meaning they were making fewer purchases but at a higher expense. This shows students still have an intent to purchase, but are investing their pennies towards higher-ticket items – or are perhaps prioritizing higher quality items (which would be in line with Gen Z’s focus on sustainability!).
What does this mean for brands?
Naturally, November and December were the exceptions to this - after all, the festive season is a huge spending period for students!
UK average basket spend in 2023: £55.07
Technology and mobile
The world of tech and mobile is huge for Gen Z students - after all, their entire lives are online! September and October were amongst the biggest spending months for students in 2022 and 2023 - unsurprising when we consider the back to school season falls during this time.
What does this mean for brands?
In 2023, AOV gradually increase as we headed toward students’ return to campus, with spending peaking in August at just under £350. This is certainly one for tech and mobile brands to be aware of when wanting to capture students’ spending: ensuring your back to school campaigns are in full swing by late summer is the key to success!
UK average basket spend in 2023: £291.14
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Health and beauty
The health & beauty sector took a bit of a hit in 2023, and with young people committing to cutting down on non-essential items, it’s logical to assume that shoppers were sticking to the bare necessities.
Interestingly, transactions over the 2023 festive period increased compared to the previous year, whilst AOV over the same period was down. This suggests that products within the health and beauty sector are still a popular option for gift giving, but shoppers are less likely to splurge money when it comes to spending on someone else…!
What does this mean for brands?
This is something for health and beauty brands to bear in mind when we head towards this period again in 2024; with strong competition across sectors in the build-up to Christmas, brands need to work harder than ever before to capture the spend of these young shoppers.
UK average basket spend in 2023: £40.24
Travel
Transactions in 2023 were up throughout the year in the UK compared to those in 2022, peaking in September and October (did someone say ‘loan drop’?!). AOV followed a similar trend, with average spend being highest around January and April (also loan drop time!).
What does this mean for brands?
In 2024, travel brands need to focus their campaigns around these loan drops (January, April, and September) to really tap into students and their newfound wealth!
UK average basket spend in 2023: £185.33
Food and drink
2023 food and drink transactions unsurprisingly grew from September in the UK, perhaps following students’ return to university. With the summer period experiencing a slight lull, September-December saw a significant increase. This was also reflected in average order value data, with August, September, and October seeing an increase compared to 2022.
What does this mean for brands?
For food and drink brands wanting to target students, the back to school season and post-Christmas period is the most effective time to do so; students will want to spend time catching up with friends over good food or drowning their January sorrows at the pub, and they’ll be in need of a student discount to support them!
UK average basket spend in 2023: £24.52
How can brands reach Gen Z during a cost of living crisis?
So we know that Gen Z is still spending, but with limited funds, the competition to catch their attention is high.
In this section, we’ll be sharing our top tips for how brands can reach Gen Z amidst rising inflation, looking at how your youth marketing can convert their interest into spending.
1. A strong student discount program
Why? Proven to get great results time and time again across every territory, in every sector
How? Introduce discounts for students or optimize your current offering. Get in touch with us today to discover how you can promote your student discounts to drive conversions!
“If there’s a discount, I’m more likely to go back.” Gen Z student
‘“I love brands with a really good loyalty program, something cheesy that you’re really gonna love.” Gen Z student
2. Invest in brand-building
Why? From content to innovation, a focus on your branding will lead to a positive relationship with students, which will in time lead to sales and loyalty. Patience is key!
How? Why not try our Pion’s peer-to-peer influencer marketing program, Pion Creators. We can help you deliver authentic content with peer influencers,
3. Remember: students have fixed outgoings
Why? Students won’t be impacted in the same way as the ‘average’ person as they’re less likely to have dependents, plus, many have the support of a student loan.
How? Aim to maximize engagement around key spending periods, such as loan drops (January, April, September) - they’ll be eager to spend the lump sum that’s landed in their bank accounts, and looking for brands to connect with!
Key takeaways
So there you have it: your ultimate guide to understanding Gen Z and the cost-of-living crisis.
Of course, we have commercial goals to hit, targets to reach and sales to make. But we also have a responsibility towards young consumers to make sure that they’re making decisions that won’t set them up negatively for the future.
Luckily, Gen Z still wants to spend their cash. But the more we know, the more we can support them (earning their loyalty) and hit commercial goals.
Want to know more?
Check out our High inflation and Gen Z and UK students and the rising cost-of-living sector reports, where we break down
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Want more data?
Our ‘Students and high inflation’ report delves into this generation’s spending habits, sector by sector.
Want more data?
Our ‘Students and the rising cost-of-living’ report delves into this generation’s spending habits, sector by sector.
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