Gen Z vs. Millennial Spending Habits: Does Parenting Affect Who’s Splurging More?
Written by
Jake Safane
Edited by
Gary Dudak
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Many millennials came of age at a time when the mantra “Treat yo’ self” from “Parks and Recreation” became popular. However, Gen Z seems to have taken this financial planning principle to heart even more.
According to a McKinsey study, 63% of Gen Z global consumers plan to treat themselves/splurge over the next three months, while only 50% of millennials said the same. This trend of Gen Z splurging more than millennials holds across income levels. High-income individuals are more likely to splurge, but even most low-income Gen Z treat themselves.
The top categories Gen Z plans to splurge on include:
- Restaurants/dining out/bars
- Apparel
- Groceries
- Beauty and personal care
- Footwear
Millennial’s fun money priorities look similar, with the main difference being prioritizing travel. Their top five splurge categories are:
- Restaurants/dining out/bars
- Groceries
- Apparel
- Travel
- Beauty and personal care
What’s driving these spending patterns between Gen Z vs. millennials? One possibility could be that parenting plays a major role.
Does Parenting Make a Difference?
Gen Zers were largely raised by Gen Xers, and millennials by baby boomers. Per the McKinsey study, 35% of Gen X plan to splurge vs. just 19% of boomers. So are baby boomers passing down more lessons on self-control with spending?
“I don’t believe that differences in how parents raise their kids fully explain how Gen Z and millennials spend their money. It’s more about the time when they were growing up,” said Taylor Price, Gen Z personal finance expert and founder of Priceless Tay.
Many millennials started their careers around the Great Recession and COVID came as they started families and bought houses. Gen Z has also had to deal with coming of age during the pandemic, but millennials may have been less influenced by the shift to online environments that the pandemic helped facilitate.
While it’s possible in some cases, the more likely, broader explanation is that generational differences in spending habits reflect respondents’ ages and life experiences.
“Social media, where word of mouth and recommendations are common, has a big impact on Gen Z. Another interesting take here is that people often form money habits by age seven,” Price said. “Even though Millennials didn’t grow up with smartphones and tablets, they learned to live without the things always shown off on social media.”
Parenting has a big impact on spending habits. It’s not necessarily as simple as painting with the broad brush that boomer vs. Gen X parenting has caused the differences in millennials vs. Gen Z spending. Generational differences aside, however, what you say or don’t say about money can affect your children’s spending habits later in life.
“How parents approach, discuss, and spend money completely influences and shapes how the next generation will see money for the rest of their lives,” said Chad Willardson, founder and certified financial fiduciary at Pacific Capital. “Parents who raise their kids to be careful and conservative savers will often hesitate before taking big financial risks or splurging with impulsive spending. Parents who are looser with their wallets will influence their kids to grow up with a YOLO attitude and YOLO spending habits.”
How To Approach Splurging
Start the conversation early to instill better money habits in your kids.
“Kids as young as three or four years old begin learning to be responsible with money. Kids learn from real-life experience so give your kids experiences with money and earning money on their own.” Willardson said. “Show them the power of investing at a young age. Promoting generosity and setting clear boundaries further enables children with essential financial skills and a responsible mindset.”
Parents — as well as those currently examining their spending habits — may want to evaluate their relationship with splurging. Sometimes this is seen as an overindulgence and therefore negative, but it’s also possible to frame splurging as a responsible way to reward yourself.
“When done with a plan, splurging can be an amazing thing. I love a good spend as long as it doesn’t go over the budget I set aside for impulse buys,” Price said.
With a little added control beforehand, you can free yourself up to enjoy splurging, without dealing with the repercussions of overspending.
“Setting up a ‘fun fund,’ which isn’t the same as an emergency fund, is a great idea especially if you’re a natural spender.” Price said. “By putting some of your paycheck into this fun fund every pay period, you can occasionally buy something without feeling bad about it because you know the money was set aside just for that.”
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