Generation Z, which encompasses people born between the second half of the 1990s and 2000s, prefers to buy luxury items such as vintage Chanel bags instead of saving for long-term goals such as buying their own real estate, Bloomberg reports.
Usually, when people face economic instability, they tend to refrain from spending. However, the youth of today are doing the opposite, viewing their financial future as already doomed and, therefore, spending money on instant gratification.
According to Stephen Wu, a professor of economics at Hamilton College in Clinton, when people feel more dependent on external factors, such as the economic situation, it is harder for them to save. He argues that feelings of fatalism and unwise financial habits are becoming more common, especially after global crises such as the coronavirus pandemic and the 2008 economic crisis.
Young people are increasingly staying with their parents, who help them with large purchases and basic needs. Instead of investing in their own homes, Generation Z members spend their income on pleasure goods, travel, and designer items.
An example is Nia Holland, a 24-year-old student at the University of Michigan, who spent her savings on a vintage Chanel bag instead of saving for more serious goals. She believes that traditional paths, such as buying a house and starting a family, are out of her reach, so she doesn’t deny herself “the little joys of luxury.”
Like Nia, other members of Generation Z take a similar approach, spending money on things that bring them pleasure in the here and now. This is defined as an attempt to focus on immediate needs, given the challenges posed by economic instability, changes in the labor market, and other factors.
It is argued that the purchase of luxury goods may look illegitimate in the face of economic instability, but for Generation Z, who consider housing and family formation unattainable, it is justified.
