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How an economic downturn will influence Gen Z financial habits

by Christina Germano
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    In light of COVID-19, the world is changing more rapidly than anyone could have predicted. One of the most likely outcomes will be an economic downturn. How will Gen Z react?

    As the generation with the greatest potential buying power, Gen Z remains a key audience for brands across all categories. How will this important market segment react to the first major economic crisis it will encounter in adulthood? Only time will tell, but it might be possible to make some predictions based on the core values they have displayed thus far.

    How history sways Gen Z financial habits today

    Gen Z has already shown that they are more financially practical than their Millennial counterparts, most likely because they were young children during the 2008 recession. Even as kids, they observed their parents struggling to overcome debt and unemployment, and as a result, they learned to be more careful with their own money. Based on this history, Gen Z should be well-positioned to weather the impending recession. 

    We're still in the early days of this economic crisis, but Business Insider has reported that Gen Z has already cut back on spending. A survey released in March showed that 41 percent of Gen Z participants were cutting back on spending in preparation for the pandemic, and 49 percent of them reported an impact on their purchasing decisions. 

    However, Gen Z certainly hasn’t stopped shopping altogether, but our own UNiDAYS survey of verified students on the UNiDAYS Platform showed that—not surprisingly—the focus of their shopping has shifted:

    • 33% now prioritize essential purchases
    • 16% have shifted from in-store to online shopping
    • 74% look for discounts before they buy

    The ability to gain real-time insight from Gen Z consumers is more important now than ever before. If your brand is looking to instantly and easily connect with a verified audience of 13M+ Gen Z students, then The UNiDAYS Platform is your solution. 

    In addition to getting food and other essential items delivered, Gen Z is also spending on at-home fitness solutions, entertainment, and gaming technologies.  

    The impact we'll see on Gen Z financial habits and career paths

    University-aged Gen Zs have already demonstrated that they are more pragmatic than idealistic by choosing majors that eventually pay well and institutions that best match their financial needs. In fact, 80 percent of Zs say their motivation for studying at university is to earn a higher salary. 

    They are also conscious of minimizing student debt, and therefore they choose schools based on affordability, not prestige. For Gen Zers who are about to graduate, an economic downturn is similar to that of Millennials in 2008, as they look to start their careers during a time of high unemployment and economic uncertainty. Internships have been canceled, hiring has been put on hold, and layoffs abound. 

    Gen Z seems to have been hit particularly hard. According to Business Insider, “Nearly a third of Gen Z workers have already reported being put on leave by their employers, compared to just 13% of older workers between the ages of 35 and 54.” A Harris Poll also showed that Gen Z is experiencing layoffs at three times the rate of older generations. All of this adds up to the potential that Gen Zs will tighten their belts even more and approach the financial downturn with great caution and conservative spending.

    Brands need to align with Gen Z—now

    As wallets constrict, it’s more important than ever for brands to position themselves positively in the eyes of Gen Z. Our Gen Z and Money report showed that some of the key values and behaviors this group embodies include:

    • Willing to spend, but also looking for value
    • Communicating frequently through images
    • Taking a mobile-first approach 
    • Avoiding traditional television, opting to stream instead
    • Being more influenced by friends than celebrities
    • Finding comfort in socializing online   

    Social distancing has allowed for even more time online and less time in stores, reinforcing Gen Z’s preference for mobile searching and purchasing. This indicates that brands should shift even more focus to their digital interaction with Zs.

    However, a shift to a digital-first presence doesn’t automatically guarantee your brand will resonate with Gen Z. As we move toward an economic downturn, be sure to  align your brand strategy with Gen Z values, including: 

    • Keep it real. Be authentic by sharing stories of real customers or employees and how they have been impacted by current events.
    • Communicate their way. Use videos, and stay on the social media platforms Gen Z uses. 
    • Give back. Donate a portion of sales to local healthcare efforts or beneficial causes.

    Stay informed to stay competitive

    Gen Z financial habits have been studied in the past and will no doubt be a hot topic as the world enters a new reality. Have a look at our COVID-19 Performance Impact Report to get ahead of the curve.

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