Younger generations, such as Generation Z and the millennials, are facing the dilemma of losing friendships due to their consumption habits, reveals a recent survey carried out with consumers of the digital finance and personal credit service, Credit Karma.
The study, conducted by Qualtrics on behalf of Intuit Credit Karma, surveyed more than 1,000 people aged 18 and over and found that more than a third of Gen Z and Millennials have friends who influence them to spend beyond their means financial.
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As a way to protect their finances and avoid accumulating debt, Gen Z and Millennials are making the decision to end friendships.
These younger generations are valuing friendship with people who have similar incomes and pay equivalent taxes. About 35% of Gen Z and 29% of Millennials said it's important for their friends to earn as much as they do.
Among Millennials surveyed who have spendthrift friends, 88% admitted to contracting debts by spending time with them, and 15% reported running up $500 or more in debt as a result of these encounters.
In turn, 80% of respondents from Generation Z said they have friends who put pressure on their finances, with only 2% of this generation accumulating the same amount of debt as millennials.
As for the main causes of overspending, 43% of millennials named “dining out” as a top culprit, while 37% mentioned “drinking and partying”.
Special events such as travel and vacation, were cited by 22% of respondents, and 21% said birthday celebrations are draining their finances.
(Source: Alamy)
Among Gen Z, 37% blame “dining out” as the main cause of overspending, while 36% say they are spending too much on clothes for friends.
Interestingly, 20% of Gen Z credit the self-care category, such as massages and manicures, as responsible for their lavish spending.
The main reasons for this overspending among Gen Z and Millennial consumers include fear of feeling left out, the desire to keep up with a friend's lifestyle, and the goal of pleasing one friend. Additionally, 28% of Millennials admit to having difficulty saying “no” to a friend.
Courtney Alev, consumer finance advocate at Credit Karma, points out that more than a quarter of millennials keep their income and debts a secret from friends to avoid judgment.
Alev advises young consumers to be honest and set expectations about their financial limitations when going out to dinner or partying, in order to reduce the chances of overspending.
“The idea of spending money to keep in touch with friends is not something new, but it becomes a problem when people start to lose friendships due to divergences in consumption habits”, says Alev.
“Talking openly about finances with friends can help relieve some of the stress related to money, especially if you and your friends have financial situations different,” he concludes.
