Generation Z & Millennials: Financial Challenges & Impulsive Spending

Generation Z and Millennials: Facing Financial Challenges and Impulsive Spending Habits

Generation Z and Millennials often face financial pressures that make them more susceptible to impulsive spending. Feelings of pessimism about the economy and their future make them more easily tempted to indulge in impulsive shopping as an escape. This phenomenon, known as "doom spending," if unchecked, can have a negative impact on their financial well-being in the future.

"Doom Spending": Escaping Anxiety

Ylva Baeckstrom, a senior finance lecturer at King's Business School, explains that "doom spending" is an unhealthy and dangerous habit. Exposure to negative news on social media can trigger feelings of anxiety and fear about the future, which are then channeled into impulsive shopping.

"These young people feel like the world is going to end," says Baeckstrom. "They then translate those bad feelings into bad spending habits."

A Generation Facing Financial Challenges

The CNBC International Your Money Financial Security Survey shows that 36.5% of adults worldwide feel they are financially better off than their parents, while 42.8% feel they are worse off. This indicates that younger generations are facing greater financial challenges than previous generations.

"The generation growing up now is the first generation that will be poorer than their parents," asserts Baeckstrom. "They feel incapable of achieving the same financial success as their parents."

Building an Illusion of Control

Impulsive spending can create an illusion of control amidst economic uncertainty. However, this habit can actually harm their future.

"Spending money on frivolous things makes you lose control of your future," Baeckstrom explains. "Save money and invest, and you might be able to buy a house in the future."

A Desire to Escape

Daivik Goel, founder of a Silicon Valley startup, reveals that his impulsive spending stemmed from dissatisfaction with his job and pressure from his friends.

"It was all just a desire to escape," says Goel. "People realize that saving for a house will take a long time. So, spending money on other things becomes an option."

However, Goel realized that happiness in his work could change his mindset and reduce his impulsive spending habits.

Understanding Your Relationship with Money

To overcome impulsive spending, Baeckstrom emphasizes the importance of understanding one's relationship with money. This relationship is formed from childhood and can influence how a person manages their finances.

"If you feel secure with money, you can make good financial decisions," says Baeckstrom. "But if you feel insecure, you are more likely to be tempted to shop impulsively."

Managing Money Wisely

Here are some tips to help combat impulsive spending:

Enhance Financial Literacy: Learn how to manage your money wisely, including saving, investing, and planning for your financial future.

Make Transactions More Tangible: Avoid online shopping and buy items directly from stores.

Use Cash Payment Methods: Non-cash payment methods can encourage impulsive spending due to their convenience.

Consult with a Financial Expert: Discuss your financial needs with a financial expert to get advice and strategies that align with your goals.

By understanding their relationship with money, improving financial literacy, and changing spending habits, Generation Z and Millennials can overcome financial challenges and build a brighter future.