Living in the Moment

Economic challenges have resulted in young people overspending

When it comes to weekly overspending, Gen Z leads the way with 43% overspending every week. Millennials follow at 32%, then Gen X at 19%, and finally Boomers at just 5%. From these survey responses it is clear that younger generations are more likely to be overspending.

One possible reason for this is that Gen Z and Millennials have inherited harsher financial conditions than their predecessors. For example, while Boomers benefited from the American post-war boom and Gen X enjoyed the economic upswing of the 1990s, Millennials and Gen Z have faced the 2008 financial crisis, the COVID-19 pandemic, and rapid inflation early in their adulthood. The fact that these latter two events occurred in quick succession has affected how younger generations think about saving.

While older generations worked long hours with the expectation of rewarding themselves with homeownership, for Gen Z and Millennials, the lending frenzy era effectively ended with the subprime mortgage crisis in 2008.

In 2024, many young people are trapped in expensive housing rental markets, where rent can exceed $2-3,000/month. Given these difficult circumstances, it makes sense that young adults might choose to live more in the moment, spending on takeout, streaming services, and other immediate comforts rather than savings for something they believe is unattainable.

Although the economic challenges facing young people today are undoubtedly tougher than those of past generations, improved financial education and first-time homebuyer programs can help those who currently see little reason to save.

Streaming services are a popular source of overspending

When it comes to identifying what younger generations are overspending on, streaming services are among the main culprits. In total, 15% of Gen Z and 13% of Millennials overspend on services like Netflix, Amazon Prime, Disney+, and Hulu. In comparison, only 7% of Gen X and 6% of Boomers overspend on streaming—about half as many as in the younger generations.

Given that modern generations often adopt new technologies the fastest, it’s unsurprising that streaming is so popular among them. The fact that 99% of US households are now subscribed to at least one streaming service also ensures that streaming subscriptions are a source of overspending that is likely to be around for the foreseeable future. The pandemic also accelerated the already growing streaming culture; with people looking for ways to pass the time in lockdown. Services like Netflix, with their new subscriber deals were an ideal option.

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Food delivery is a habit among Gen Z and Millennials

Takeout is another comfort frequently cited as a factor in overspending. Gen Z leads the way, with 34% overspending on takeout, followed by 31% of Millennials and 29% of Gen X.

As with streaming options, food delivery services have expanded rapidly over the past decade. During the pandemic, the US food delivery market doubled as people in lockdown turned to delivery to satisfy their restaurant cravings.

With grocery prices having risen 22% since 2019 ordering from companies like DoorDash and Grubhub is now seen as an everyday alternative to home cooking, rather than as an occasional treat. Inflation has minimized the cost difference between a high-quality home-cooked meal and takeout, making delivery a more common choice.

Overspending on food delivery by Gen Z also reinforces the idea that younger people in the US prioritize instant gratification over the delayed rewards that come from saving. Budgeting tips can help young adults enjoy both worlds—comfort today and security tomorrow.

Young Americans prioritize spending on hobbies with no regrets

Hobbies are a significant source of overspending for Gen Z, with 32% overspending in this area—over double the 13% of Gen X and 12% of Boomers who do the same.

Yet only 12% of 18-24-year-olds admit that they feel guilty about their overspending habits. It’s clear that the mindset among young US adults is not only to spend in the moment but to actively embrace it. Therefore, it’s important for Gen Z to leverage personal finance tools that support budgeting. This way, they can still enjoy hobbies while also building a solid financial foundation for their future, including a secure 401(k) for retirement.

Financial education translates to financial confidence

Economic and financial uncertainty has influenced the attitudes of Gen Z and Millennials toward spending and saving. However, another crucial factor is a lack of financial education.

For instance, 24% of Millennials and 19% of Gen Z don’t feel confident about budgeting and managing cash flow, compared to just 11% of Boomers.

By bridging the generational financial education gap, it’s possible to instill financial confidence in young people and empower them to save and budget effectively while still enjoying their daily lives. To underscore the importance of financial education for young people, First Merchants Bank launched the “I Wish I Had Learned That” campaign, which highlighted essential financial topics that are not widely taught in schools, such as mortgage expenses and debt management.

Banks like First Merchants provide various tools to assist in the financial education process. These range from calculators that help with specific financial goals, such as savings and APY, savings account strategies, and the Personal Finance budgeting tool and credit score tool on the First Merchants App, which makes budgeting more intuitive and engaging. Speaking to a banking expert in person or by phone is another easy way for younger adults to start their journey to long-term financial wellness.

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Budgeting for a brighter future

Budgeting is an essential skill, especially for young people saving for the future. First Merchants aims to make budgeting straightforward with its knowledge hubs and financial wellness tools. By providing financial education and a strong set of easy-to-use tools, First Merchants empowers young people to build their financial skills and grow their confidence—whether they’re saving for college, retirement, or simply enjoying hobbies, takeout, streaming, and nights out.

You can get started with First Merchants by opening a online account. Opening a checking account and signing up for online banking also provides you with the ability to benefit from the First Merchants Personal Finance and credit score budgeting tools in the First Merchants App, available on both Android and Apple mobile devices.

Shaping your financial future with First Merchants

The spending and saving habits of all generations are shaped by the social, economic, and governmental conditions they experience. While the differences in financial wherewithal between Gen Z and Millennials compared to Gen X and Boomers may seem stark, it’s also not unexpected. It’s no surprise that Gen Z and Millennials have a higher propensity to overspend than Gen X and Boomers, because they’re also at an earlier stage in their career and less experienced in managing money more attentively.

After all, if this piece had been written 60 years ago, it might well have discussed how Boomers were overspending on TV sets and consumer goods compared to generations that came before Boomers, such as the Silent Generation and Greatest Generation.