How the young spend their money

They are woke, broke and complicated. Businesses should take note

Young people have always perplexed their elders. Today's youngsters are no different; indeed, they are baffling. They have thin wallets and expensive tastes. They prize convenience and a social conscience. They want their shopping to be at once seamless and personal. They crave authenticity while being constantly immersed in an ersatz digital world.

As these youngsters start spending in earnest, brands are trying to understand what these walking paradoxes want and how they shop. The answers will define the next era of consumerism.

Their absolute numbers are formidable. The European Union is home to nearly 125 million people between the ages of 10 (who will become consumers in the next few years) and 34. America has another 110 million of these Gen Z and millennials, a third of the population.

The total annual spending of households headed by American Gen Zs and millennials hit US$2.7 trillion (S$3.6 trillion) in 2021, around 30 per cent of the total.

A good place to start dissecting the psyche of the young consumer is to consider the economy that has moulded them.

At the older end of the scale, today's 30-somethings came of age in the midst of the global financial crisis of 2007-09 and the ensuing recession. Their younger peers had a bit more luck, beginning their careers in years when tightening labour markets had pushed up wages. Until, that is, the Covid-19 pandemic upended many of their lives.

These two big shocks, of the sort that their parents were mostly spared in a more benign economic era between 1990 and the mid-2000s, have fostered pessimism among the young people who experienced them.

A study by McKinsey, a consultancy, published in 2022, found that a quarter of Gen Zs doubted they would be able to afford to retire. Less than half believed they would ever own a home.

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