Over two fifths (41%) of Gen Zs are spending beyond their means to ‘enjoy the here and now’, with 35% reporting that that the cost of living crisis is also contributing to the overspend. This sits alongside 23% who say the ‘fear of missing out’ (FOMO) has also played a part.
The UK-wide study of over 2,000 18-24 year olds across different lifestyle groups reveals disparities in financial literacy when it comes to banking. Despite three quarters (75%) of respondents wishing they had received more financial education at school, nearly a third of Gen Zs (31%) don’t know what a current account is. Those who took the survey cited savings, budgeting and building credit as the main financial topics they wish they had learned more about (63%, 62%, 56% respectively).
The majority (70%) of 18-24 year olds surveyed feel more worried about their current financial stability than they were this time last year, and over half (55%) do not feel confident when managing their finances.
Reaching Out For Help
Almost all respondents (90%) are speaking to someone about their financial situation, with the majority turning to family (59%). Many also turn to their friends (15%) and their bank or a financial adviser (11%). Reassuringly, 77% said they felt supported by their current banking provider, with 54% citing a good online experience as the main reason for this. When asked how banks could support them further, free financial support (35%) and better budgeting tools (32%) were ranked the highest.
This generation has a practical mindset, with 44% responding that they would consider working more or asking for a pay rise in order to deal with financial concerns. This is juxtaposed to other parts of the 18-24 population, who focus on restricting spend rather than earning more, with 43% saying they would cut discretionary spending such as subscriptions and just under a third (30%) say they’d take fewer holidays.
A Reliance On Debt
Overdrafts have become an essential financial tool for nearly third of Gen Z, as 27% use them to buy necessities. Alongside this, overdrafts are also used for going out with friends (17%), buying new clothing (15%) and travelling abroad (14%).
Only 27% of Gen Z said they do not have any debt, with student loans (36%), credit card debt (16%) and Buy Now Pay Later debt (15%) coming in as the top three most common types of debt for this generation. This counters the age-old ‘bank of mum and dad’ assumption for the age group, with only 14% being in debt to family. Bank loans are also relatively uncommon, at 9%.
Just over a third (34%) are using Buy Now Pay Later schemes at least once a month, doing so to buy clothes online (32%), large purchases (32%) and birthday or Christmas gifts (20%). 1 in 5 (20%) are using the service to assist them when waiting for payday, with 12% using it in physical food shops and 10% for takeaways. A majority (51%) are using credit cards at least once a month.
“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.
John Dentry, Product Owner at Pay.UK
He continues, “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.
“It’s reassuring to see that a large majority of this generation feel supported by their banking provider. As young people continue to navigate an increasingly challenging financial environment, they can rest assured that if they find a bank that better suits their needs, the Current Account Switch Service is on hand to facilitate a quick, easy and guaranteed transition to their new account.”
