As Gen Z spends freely on non-essentials and saves less than any other generation, economists warn their habits could fuel long-term and broader financial instability.
Gen Z’s willingness to spend more on non-essentials impulsively—even amid low savings—signals a shift in consumer values shaping today’s economy. With spending driven by instant gratification rather than long-term planning, their habits highlight a broader cultural turn toward experiential and identity-based consumption over financial caution, which was reflected in the past, fostering financial issues regarding imbalance in market growth and curbing savings rates.
And this generation’s growing income is fueling that spending power.
As of 2025, according to a study from McKinsey & Co, the average 25-year-old Gen Z consumer in the United States has a household income of $40,000, 50 percent higher than the average Baby Boomer’s at the same age– accounting for government transfers, inflation, and taxes. Gen Z spending in the U.S, which is growing twice as fast as previous generations’ spending at the same age, is on pace to eclipse and even surpass Baby Boomers’ spending globally by 2029.
Additionally, according to a study by the public relations firm, 5WPR, there is a stark difference and shifting priorities in spending between Gen Z and the older generation groups.
5WPR tracks how willing consumers are to loosen their wallets with what it calls a “splurging index,” measuring the percentage of people who say they’d spend more freely on non-essential products or services in specific categories.
Source: 5WPR, 2024 Consumer Culture Report. “Splurge Index”
According to 5WPR, Gen Z is most likely to splurge on technology, wellness, and beauty (the highest rate it has ever reached of 57%)—categories where over half say they’re willing to spend more, even if it’s not essential. On average, 59% reported splurging on their top categories, compared to just under 50% of the previous generation.
The report also shows that 47% of Gen Z say they often make impulsive purchases, a habit that drops sharply with age. Only 28% of those over 55 said the same, and over half said they’d never bought something on a whim.
An explanation for this behavior from 5WPR says, "the research shows that consumers are loosening their purse strings, especially [...] experiences that may not have been possible in previous years.” Their 2025 report alludes to the COVID-19 pandemic as a motivator to prioritize experiential consumption.
“It’s getting easier and easier to make purchases,” 5WPR notes, citing the rapid growth of mobile e-commerce platforms and social media-driven shopping for their impulsive behavior.
Furthermore, Gen Z’s elevated spending habits—especially on non-essentials and experiences—can influence the structure of the U.S. economy by accelerating demand in specific sectors like tech, beauty, wellness, and entertainment.
Gen Z’s willingness to splurge— for example, in beauty and personal care—has directly fueled growth in the industry. McKinsey & Co. notes that Gen Z is reshaping the beauty market’s trajectory, forecasting a 6% increase in beauty market growth due to rising demand from younger consumers. Brands are responding accordingly: L’Oréal, for instance, boosted its advertising and promotional spending by 11% in 2024, reaching €13.4 billion.
Still, the momentum in the economy driven by Gen Z’s spending has a flipside. As industries shift to meet their demand, the focus on trend-driven consumption raises questions about sustainability—not just for businesses, but for the consumers themselves. The same behaviors fueling growth also contribute to a pattern of limited saving and long-term financial vulnerability.
Source: Bankrate Emergency Savings Survey, May 16-19, 2025
BankRate’s 2025 Annual Emergency Savings Report showed that Gen Z has the highest percentage, 71%, of individuals who do not have enough emergency savings funds to cover three months of expenses—nearly double the 36% of Baby Boomers in the same position, with the percentage declining steadily across each older generation.
“Lower saving rates can lead to households having less ability to address financial emergencies,” according to Jonathan McCarthy of the Federal Reserve Bank of New York. “Longer term, lower saving rates could hamper people’s ability to finance their retirement,” warns “on a broad economic scale, a low saving rate either limits the nation’s ability to invest or requires the nation to attract funds from other countries.”
In prioritizing spending over saving and changing industry growth, Gen Z may accelerate an economic shift; they may be the least prepared to weather—but will inevitably have to navigate.
