Gen Zers are racking up credit card debt and brands need to step up

In 60 seconds...

• 97% of students feel like they're struggling more with the rising cost of living than people think
• 77% of UK Gen Zers (71% US)* are utilizing some form of credit/financing agreement
• Brands need to reassure shoppers that their products are worth the investment

The rising cost of living is impacting Gen Z's lives in ways we couldn't have predicted: not only are food prices and living expenses increasing, but their education, careers, and personal relationships are also suffering.

And, in perhaps an unsurprising yet nonetheless saddening turn of events, Gen Zers are turning to credit cards and loans to support them, resulting in rising debt and uncertain credit scores.

But how are high inflation and this consequential debt impacting this generation, and how are they managing their personal finances? In this blog post, we share how their shopping habits are affected and how brands can best support young adults.

Gen Zers, student debt and personal finance

Pion research revealed that 97% of students feel like they're struggling more with the rising cost of living than people think, whilst 38% feel their friendships have been negatively impacted by their financial concerns. And, aside from their education, other major concerns for this generation include the impact on their long-term careers, the housing market, and their credit ratings - the latter of which, evidence suggests, is already suffering.

A report from Credit Karma, a California-based personal finance company, revealed that Gen Z is racking up credit card debt faster than any other generation, with Gen Z Americans racking up $2,781 of average credit card debt in the final quarter of 2022. Whilst this was a lower amount compared to older generations, Gen Z's grew at the fastest pace.

How is the rising cost of living impacting Gen Z's shopping habits?

Overall, 74% of young people are looking for cheaper versions of the products they usually buy, whilst a significant 83% will be cutting down on non-essential spending. In order to target your marketing and lock in these customers, brands must take the time to understand young people's purchasing processes and how they're spending their money.

How are Gen Zers managing their personal finances?

Whilst Gen Zers may once have been the spontaneous see-it-buy-it-spend-it types, the cost-of-living has caused them to become more cautious of their spending. In fact, 59% of UK students and 66% from the US are spending more time evaluating before making a purchase.

There’s even a trend to reflect their new-found saving skills (naturally): ‘loud budgeting’. Coined by TikToker Lukas Battle, ‘loud budgeting’ is about being vocal in your financial constraints and saving targets. Essentially, it’s about being confident in your goals and removing the stigma from the topic.

Interestingly, on the back of this, a lot of Gen Zers are also feeling guilty when they do purchase a non-essential spend. "Inflation means I have less purchasing power, a lot less consumer satisfaction", Gen Z student Victoria shared with us. "Not because of any difference with the products, but more so the regret and guilt from the purchasing. It means I'm less confident in my consumer decisions."

So what does this mean for your brand? Well, you need to target your messaging in order to reassure shoppers that your products are worth the investment (and to prevent them from feeling guilty) - but you also need to ensure that they really get some bang for their buck. This will encourage them to return to your brand again, and again, and again.

‍How are young people spending their money?

Aside from Buy Now, Pay Later schemes, such as Klarna, which are widely available across a number of sites (although 67% of Gen Z weren’t aware that BNPL can have a negative impact on their credit score), rising inflation is causing Gen Zers to dip into other resources. 

In fact, 77% of UK Gen Zers (71% US)* are utilizing some form of credit/financing agreement, whilst many others are relying on student loans.

*Data gathered from Pion’s Youth Trends Report 2024

How can brands support young people with student debt?

It's not all doom and gloom, however. Whilst Gen Zers may be struggling financially and racking up debt, there are ways that brands can support them to ensure they're reaching their financial goals, and secure their loyalty.

1. The importance of financial education

Over half (67%) of UK and US young people surveyed by Pion revealed that they'll be looking for online content about how to save money. This provides brands with a great opportunity to step up and make a positive difference.

As Gen Zer Victoria shared with us: "Budgeting, balancing rent, finances etc - that isn't taught enough in schools. Even in university, I was pushed immediately into needing to know how to allocate my salary, the money my parents gave me, that I literally sank and had debt on my credit card within my first year because I just didn't know what I was doing."

Young people want and deserve good financial education, and brands can use their social accounts to initiate well-needed conversations, platform experts, or run partnerships with 'finfluencers'.

2. Offer discounts and deals

A huge 46% of students look for student discounts every time they make a purchase, and 90% of students consider shopping with brands if it offers a student discount. Additionally, brands who offer student incentives typically see a 20% increase in average order value. Want to know more? Get in touch!

3. Earn young people's loyalty

By ensuring positive shopping experiences, exhibiting the worth of your brand, and offering sweet deals, young shoppers will reward you with their loyalty. Similarly, consistency, reliability, and personalization also go a long way, and will encourage them to return to your brand for life... and maybe even recommend you to a friend or two!Whilst Gen Zers are undoubtedly suffering right now, there is some good news: you, as brands and youth marketers, have the power to make a real difference. It's up to us to ensure that this young cohort is supported, educated, and able to make the most well-informed decisions possible.

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