It’s the season of giving – but at what cost? Managing Director Colin & Associate Director Claire discuss generational spending behaviours during the festive season.
After two years of feeling the squeeze with the Cost of Living crisis, two recent surveys delivered contradictory messages on likely spending behaviour for this Christmas.
A study by Opinium for Hargreaves Lansdown (click here to read) predicted that consumers will spend an average of £611 on Christmas this year, an increase from £569 and £576 in 2023 and 2022 respectively.
Conversely, new research by Go.Compare (click here to read) reported that over a third of consumers (35%) have made the tough decision to spend less this year, with estimated average Christmas expenditure down to £434, compared to £658 last year.
…and to be honest, we’re not unsurprised by this. Financial behaviour is incredibly complex and we often see a tug of war at play, with strong intentions to save money coupled with impulsive spending behaviours (the intention-action gap!). This is often amplified at Christmas, when many of us will definitely be feeling overwhelmed by the cost of Christmas and under pressure to spend more than we have.
We have very much seen the intention-action gap play out in some research we have recently conducted around spending behaviour in the run up to Christmas. It has been most strongly pronounced amongst Gen Zs.
Gen Zs show a strong desire to be financially responsible – likely heightened by COVID and the CoL crisis, both experienced at key points in their journey to financial independence:
- Gen Z are the group more likely to be keeping an eye on their finances over Christmas (47%), compared to only 28% for Baby Boomers
- They’re also twice as likely to want advice from financial services providers (41%, compared to 20% overall) on how to manage their money over the Christmas period. Perhaps this isn’t surprising given that many feel that school didn’t prepare them for financial challenges, and so they’ve had to teach themselves and rely on online resources and ‘Finfluencers’ to learn about personal finance.
However, there is a disconnect between their intentions to be financially savvy and their actions – with temptations and short-term gratification prioritised in the run up to Christmas:
- Gen Zs were twice as likely to have bought Christmas presents on Black Friday (59%, compared to 29% overall) and Cyber Monday (37%, compared to 19% overall), no doubt to psychologically take advantage of the perceived bargains and save money.
- They are also more likely to be using Buy Now Pay Later options for their Christmas purchases this year (51%, compared to 27% overall). This is their easiest access to credit.
- Gen Zs are the least worried about online fraud (31% not worried at all, compared to 21% overall) when purchasing this Christmas. This is concerning given that this cohort relies heavily on digital platforms, apps and fintech solutions for managing their money – their comfort with digital platforms may be fostering a superficial sense of security.
So what does this mean?
We’ll never stop impulsive spending and we’ll all always have grand intentions that don’t play out. But there are certainly opportunities to support the younger generation in their journey to financial independence, especially during times when the pressure to spend is greater. Could real-time spending alerts coupled with tailored advice be utilised more strongly during big sales periods (Black Friday and Cyber Monday)? Would highlighting the prevalence of online fraud amongst younger generations (harnessing social proof) help the message to hit home? Real food for thought for financial service providers!