Generation Z is now in that awkward transition stage between adolescence and adulthood. As we age, we confront new challenges: social change, separation from family and financial responsibility. Financial maturity is one of the hardest of these challenges and, so far, a significant portion of Gen Z has struggled with the adjustment.
Compared to other generations, Gen Z is the most debt-prone. Whereas 4.8% of Baby Boomers and 9.6% of Gen Xers have maxed out their credit cards, 15.3% of Gen Z borrowers have done the same. This is concerning, as many Gen Zers have only just begun their journey into adulthood. Economists link maxing out credit cards to falling behind on payments, a habit difficult to break once it happens — which is why racking up poor credit scores so early sets Gen Zers up for a long struggle with debt.
Not every Gen Z individual is financially immature (and it’s worth noting that tough economic circumstances such as rising cost of living are at play), but a few trends demonstrate that a good portion of them — at least those heavily active online — definitely are. On one hand, we are products of capitalist culture, but on the other, we need to acknowledge our responsibility for our poor financial habits.
Various social media trends, especially on TikTok, show Gen Z’s tendency to avoid taking financial accountability, especially when it comes to personal spending patterns. For months now, young TikTok creators have used “girl math” to justify their poor spending habits. The “girl math” trend makes an effort to humorize overspending — claiming that, for example, luxury purchases are investments in our future selves. Cycles like these can lead to debt because they cause individuals to treat currency and purchases like those in a game with no consequences.
“Treat culture” is also associated with Gen Z (and the younger end of the Millennials). It typically stems from the desire for instant gratification. After a taxing day at work or in class, you may choose to treat yourself by buying something you like. This purchase can range from a cup of coffee at a local cafe to a piece of jewelry you’ve eyed for a while. People justify this type of spending because it is meant to make up for other difficulties. As a result, treating yourself seems less about prioritizing yourself and more about contriving excuses to rationalize overspending.
Spending money to make up for a bad day is alright if it is done very sparingly, but the regularity of such purchases becomes harmful when spending continues even when funds are low. With one in seven Gen Z credit card users facing debt, it is important that we take measures to work on gaining better financial understanding and maturity.
To combat its poor financial habits, Gen Z has tried new solutions to limit overspending. Some argue that Gen Z’s financial immaturity era is over, because a portion of them are participating in a “no-buy” year in 2024. A no-buy year means choosing not to purchase luxury items and cutting down on other indulgences like dining out or buying new clothes. Participants only purchase essentials during that period, such as groceries and household necessities.
However, cutting out all spending (excluding essentials) does not ensure financial maturity. Although limiting personal spending is a step in the right direction, completely putting a stop to it demonstrates that without extreme measures, our generation struggles to enforce financial rules on themselves. A better alternative would be to gradually reduce spending.
Instead of going out to buy a sweet treat or a comfort item after a tough day at work or an excruciatingly difficult exam, we can do things that don’t cost money. By staying in to watch a movie with a roommate after a difficult exam or scavenging around the house to make the most out of items you already own, you can avoid breaking the bank. This strategy still allows people to occasionally indulge in personal luxuries while keeping spending at a minimum.
But above all else, the best way to avoid falling victim to financial debt is to improve your financial literacy. As students, we have resources we can take advantage of in this field. Taking classes to educate yourself on finances and economics could be a helpful way to learn good spending habits, given that not every state mandates high schools teach these skills. Incorporating economics classes into your schedule teaches you about money before you enter the professional world and face more severe financial difficulties.
In an introductory economics class a friend took her first fall semester, her professor required that she record her weekly spending. She learned how to utilize a spreadsheet to categorize her purchases and calculate totals to find out what she spent the most money on. She identified how much she spent on food, essentials and other personal indulgences or necessities. From there, she and other students could discover what they seemed to waste the most money on, how they could cut down on spending and which categorization techniques benefited them most.
The cost of tuition at the University of Michigan is a high price in and of itself, so using the resources the institution offers, like classes in economics and finance, could help us make the most out of the expense. Developing financial literacy can save Gen Z students from the crushing weight of maxed out credit cards and overspending habits.
Giselle Sesi is an Opinion Columnist who writes about the overlap between politics and the human condition. She can be reached at gigisesi@umich.edu.
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