Results of an anonymous analysis of one million users of social finance app Frich find that significant numbers of Generation Z consumers are developing poor financial habits, partially due to a negative view of the future. Many are “doomspending”, maxing out credit cards and not saving.
Close to half, 47%, of Gen Z don’t have an emergency fund, while only 29% are actively building one. Those who do are 80% short of the recommended amount, averaging only $6,820.
Many, 44%, have maxed out a credit card at least once. Instead of saving for the future, Gen Z is focused on “doomspending”—recklessly spending money due to the belief that saving is pointless.
When asked what they are saving for, 21% of Gen Z said a house, 17% are saving for a car, and 13% are saving to pay for education. Should they get into financial trouble, 31% of Gen Z would ask a family member for help, 27% would ask a friend, and 25% would prefer to assume debt.
Most wouldn’t even help their significant other in a jam, as 76% said they wouldn’t lend them any cash. Unsurprisingly, only 17% would ask their significant other for financial help.
Frich is a social finance app that enhances Gen Z’s financial literacy by providing users with raw, authentic insights into their peers’ financial habits. By collecting anonymous data and opinions from users across various cities and tax brackets, users can benchmark themselves against real data from their peers.
Since launching in 2021, Frich has raised $2.8 million from investors, including Antler, Restive Ventures and TruStage. The app has partnered with fintechs such as Fundrise, rideshare service Lyft and Nordstrom to connect traditional financial institutions with a younger demographic.
“These findings show that Gen Z is still unprepared for emergencies and extreme situations, despite the frequency of such events over the past year or so,” said Frich co-founder and CPO Aleksandra Medina. “Rising inflation, a difficult job market, and a persistent housing crisis have created an economic environment where young people struggle to prioritize savings.
“Many Gen Zers find themselves walking a financial tightrope, torn between covering immediate expenses or setting money aside for emergencies and paying for goods on credit instead. The resurgence of financial pressure leaves little room for Gen Z to save in the same way previous generations did.”