Gen Z willing to get into debt as overspending triggered by FOMO
Young adults are spending beyond their means in a bid to satisfy their ‘fear of missing out’, a study finds.
Nearly a quarter (23%) of 18-24-year-olds spend beyond their means to avoid ‘FOMO’, with overdrafts proving to be essential for this generation.
According to the survey from Pay.UK, the operator of the current account switch service, 27% use overdrafts to buy necessities, while 17% dip into the red to go out with friends, 15% to buy new clothes and 14% to travel.
Meanwhile, just over a third (34%) are using buy now, pay later (BNPL) schemes once a month to buy clothes online and shop for birthday and Christmas gifts.
For one in five, they’re using BNPL schemes to bridge the gap until payday, while 12% have used it for their food shop and 10% for takeaways.
But more than half of the 2,000 Gen Zs polled said they’re using credit cards at least once a month.
Only 27% said they do not have any debt, while 14% said they’re in debt to family but 9% have a bank loan.
Beyond FOMO, 41% of Gen Zs are spending beyond their means to ‘enjoy the here and now’, but 35% said the cost-of-living crisis is also contributing to the overspend.
Better financial education
Pay.UK revealed 75% of respondents wished they had received more financial education at school as they wanted to learn more about savings, budgeting and building credit.
It comes as a “surprisingly high” 31% of Gen Zs said they don’t know what a current account is.
But in addition to the lack of financial literacy, the majority of this age group are more worried about their current financial stability than they were this time last year. Over half (55%) do not feel confident when managing their finances.
But they turn to family (59%) for help, while 15% turn to friends and 11% turn to their bank or financial adviser.
John Dentry, product owner at Pay.UK, said: “The number of 18-24-year-olds who do not know what a current account is surprisingly high and highlights the need for better financial education for Gen Z, not only for current accounts, but banking habits more generally.
“For those who do not know what a current account is, it’s really important that banks, institutions, and we as a service are educating young people, so they can take the first step in finding a bank account that best suits their needs.
“Banks and building societies offer a host of products and services that could better serve the needs of young people across the UK. From cash incentives and higher interest rates for the budget conscious student, to better customer service and streamlined apps, which may offer an enhanced user experience.”