Gen Z's Costly Addiction

Gen Z has a hidden addiction, and it resides on their phones and quickly eats up any savings they could have in today's inflationary economy, according to a new study.

In a new Qualtrics study, on behalf of Intuit Credit Karma, a whopping 33 percent, or one in three, Gen Zers and millennials said they have a shopping addiction. The source of the addiction is largely online, with 69 percent of the younger generation blaming social media for their bad habits, with Instagram, YouTube and TikTok Shop at the top of the list as enablers.

Gen Z and millennials are fighting to ward off the temptation of shopping digitally, which can easily be done with just the click of a button or a saved credit card on file.

Intuit Credit Karma said 74 percent of the surveyed Gen Z and millennial group said they are going to be more intentional with spending in 2024, especially among those who self-identified as shopping addicts.

The impact of a shopping addiction can be severe for Gen Z and millennials' finances, considering 18 percent said they'd taken on more than $5,001 in debt and 21 percent added on between $1,000 and $5,000 in debt.

Clothes and accessories were the biggest offender, with 64 percent of Gen Z and millennials saying they spent the most on this category, but shoes, restaurants and beauty products also took sufficient amounts of their spending money, as well.

Many of the harmful shopping habits popped up during and after the COVID-19 pandemic when Americans were stuck at home, and many took to online shopping as an escape.

"In the two years following pandemic lockdowns, we observed consumers spending money as a way to make up for lost time and then, later, as a way of coping with stress, leading to dwindling savings and high credit card balances, in particular for Gen Z and millennials," Courtney Alev, consumer financial advocate at Intuit Credit Karma, said in the study.

While the study gave early indications that Gen Z and millennials are looking to cut down on their spending, Alev recommended that shoppers engage in a "no-buy" month and focus on building their wealth instead of using it on the latest fashion and gadgets.

"You can always window shop and bookmark purchases for later," Alev said. "Then, at the end of the month, if you're still thinking about the item and have a little extra money set aside, you can make the purchase."

If younger Americans continue to ignore any financial insecurity and make impulse purchases online, they could soon find themselves in massive debt, no matter how high the immediate gratification, said finance expert True Tamplin, the founder of Finance Strategists.

"These platforms, with their pervasive influence and ubiquity, have seamlessly integrated themselves into the daily lives of younger generations, making them exceptionally potent conduits for impulse buying and consumerist temptations," Tamplin told Newsweek.

Kevin Thompson, a financial planner and the founder and CEO of 9i Capital Group, said these generations likely fell victim to online shopping addictions as a way to curb their stresses.

"Human psychology suggests we become addicts to a behavior to release the dopamine that helps absolve us of distress," Thompson told Newsweek. "So, if Gen Z is feeling distressed and overwhelmed by the trifecta of issues on its plate...student loans, lower job prospects due to ever changing work environment and rising costs...I would suppose that shopping would be an easy addiction."

And because Gen Z and millennials are more likely to be on social media already, they're more susceptible to the easy purchase click. Often, there's no barrier between seeing an advertisement or post and entering their credit information.

"The only issue I see as a problem is the speed and efficiency by which you can purchase things on credit," Thompson said. "It is often a one-click purchase which is entirely different than what we had back in the 80/90s having to write a physical check."