Last Updated on Apr 30, 2024 by Harshit Singh
The Gen Z Era
From Baby boomers to Gen X, Gen X to Millennials and Millennials to Gen Z there have been significant changes in lifestyle, spending patterns, and behaviour. These patterns don’t change overnight, and these patterns are changed for multiple reasons. These changes in pattern kill old businesses and, at the same time, create room for new ones.
Generational age ranges span significant periods, with spending habits often overlapping. For instance, the spending patterns of a 21-25-year-old Gen Z individual may resemble those of a late millennial, as habits evolve gradually.
As Charles Darwin said, “It is not the strongest of the species that survives, nor the most intelligent, but the one most responsive to change,” highlighting the importance for businesses to understand and adapt to these evolving preferences. Let’s zoom in on this very principle and understand what has changed between the two generations.
Forget Millennials; there’s a new kid on the block driving India’s economic boom: Generation Z. While making up only 22-25% of the population, Gen Z punches well above its weight, contributing a whopping 32% of digital payments and 33% of credit transactions. It’s not just about spending. A stunning 54% of first-time mutual fund investors are Gen Z, according to CAMS. That translates to roughly 85 lakh (8.5 million) new accounts opened by this young generation, with the youngest member being a mere 12 years old.
Table of Contents
Millennial’s Academia to Gen Z’s Entrepreneurial Spirit
In the Millennial era, career paths were often predetermined, with students primarily focused on academic pursuits like CA, MBA, or MBBS. However, the Gen Z era witnesses a sharp shift as heightened expenses prompt younger individuals to seek alternative income streams. For instance, a 16-year-old starting college may embark on ventures like selling printed t-shirts or day trading in the stock market. This reflects a growing trend of proactive entrepreneurship and self-sufficiency among Gen Z students, driven by a desire for financial independence. Unlike Millennials, who were primarily focused on academic excellence, Gen Z students are more inclined to explore various avenues to supplement their income.
Big Families to Solo Stars
Very few kids in the millennial era were single children. It was a normal thing to have 3-4 siblings, but now there is a noticeable change. Parents prefer having just one child, and hence disposable income per child has surged massively. In the past, parents were more cautious about expenses, often limiting outings to expensive restaurants or cafes. For example, going to places like Starbucks was once a blue moon thing (in my case, it wasn’t even a thing 😊) rather than a regular treat. Consequently, children growing up in this era are accustomed to such experiences and may not exhibit the same hesitation as their predecessors when it comes to spending money at these establishments.
Another notable change is in the way social gatherings like birthday’s are conducted. In the past, it was common for parents to host gatherings at home, preparing meals for their children and their friends (the lovely Pav Bhaji and cake combo, and if you were lucky, you would be treated with Coca Cola). However, nowadays, it’s more common to find school kids celebrating special occasions or simply hanging out with friends at upscale restaurants rather than in someone’s home.
Gen Z: The Decision Taker, Social Media: The Decision Maker
In 2004, Orkut was launched, followed by Facebook’s arrival in India in 2006. Little did anyone anticipate that Facebook (now Meta) would evolve into a pivotal force shaping purchasing decisions for this generation. Today, Meta’s platforms play a crucial role in influencing the buying behaviour of Gen Z. For instance, while browsing Instagram, many Gen Z users find themselves drawn to purchasing intriguing gadgets and unnecessary clothing items purely for their aesthetic appeal (I’m guilty of filling my wardrobe with Instagram finds) ☹. The seamless shopping interface offered by Instagram, Facebook, and other social media platforms has become irresistibly convenient, making impulse purchases all too tempting.
Another aspect of this phenomenon is the influence of influencers, who often lead the way in setting trends that their followers blindly emulate. A recent example of this is the surge in popularity of a drink called Prime, heavily promoted by YouTubers like KSI and Logan Paul. Till the time the drink wasn’t launched in India, people used to bulk import it from the US and sell it at absurd prices (₹ 1500- ₹2000 for 500 ml bottles). The prices have come down after the launch to ₹500, but still, it is very high for a price sensitive market like India. Despite the steep markup, many of the YouTuber’s young followers eagerly purchased the drink, highlighting the significant impact influencers can have on consumer behaviour.
Student loans – A big part of Gen Z’s life
As per Bank Bazaar’s report, education inflation stands at a staggering 11-12% (double the CPI inflation) 😲, making it increasingly challenging for many students to access quality education. The number of Indian students studying abroad has surpassed 1.3 million, with projections indicating that by 2025, overseas expenditure on education by Indian students will soar to $70 billion.
In the Millennial era, there were very few options to opt for like MBA, CA, MBBS, or engineering, but today there are multiple options just in graduation BAF, BA, BMS, BMM, etc. Earlier, a lot of people used to opt out of studies post 12th or post graduation and join their family businesses, but now every student wants to make their own identity and dreams of going abroad for graduation, an MBA, or a masters.
For many Gen Z individuals burdened with student loans, the fear of repayment is huge. Doubts about their chosen course or career prospects often fuel anxiety about their ability to manage hefty loan amounts. A friend’s experience studying at Germany’s prestigious university highlights the uncertainty. Initially, he expected a job that would facilitate repayment within two years and also help him survive in Munich, but a shift in plans due to unexpected job circumstances has left him with the option of returning to India without a clear strategy for loan repayment.
Acceptance over Authenticity
In the Gen Z era, social acceptance often drives behaviour, a phenomenon less prevalent in the millennial era due to budget constraints. This reminds me of my 11th-grade experience; I found myself conforming to fit in with the ‘cool’ college group, sacrificing authenticity for acceptance. Transitioning from local transport to Uber rides (I used to hide the fact that I was travelling in local trains) and Udupi restaurants (which had my favourite idli medu vada sambar 😋) to Starbucks (which had expensive Frappuccino and a croissant) became my norm.
However, after six months of conformity, I realised the importance of genuine connections over superficial acceptance. True friendships or relationships thrive on authenticity, not acting skills, teaching me a valuable lesson in self-acceptance and genuine relationships and friendships (Back to my Idli medu vada sambar😋)
Break the YOLO cycle
The YOLO mentality prevalent among many Gen Z individuals often leads to a mindset of spending today and saving tomorrow, resulting in procrastination of savings and investments. However, a significant barrier to financial literacy stems from parents’ reluctance to openly discuss their investments and finances with their children, viewing it as an uncomfortable conversation due to perceived immaturity. Yet, upbringing plays a crucial role in shaping attitudes towards saving and investing; witnessing parental struggles, such as job loss or medical emergencies, instils a sense of financial responsibility from an early age. Sadly, the absence of such conversations can have significant consequences, as evidenced by my friend’s experience of unexpectedly shouldering family obligations due to his father’s passing without prior knowledge of significant investments. As my father often emphasises, “Your family must miss you emotionally and not financially.”
A lot of Gen Z individuals have been trying to make quick money by doing F&O, leveraged stock trading, and other sources, but not many are bent toward making long term sustainable wealth. Many see Mediclaim and term insurance as expenses, and this leads to massive troubles when there is any kind of emergency.
Simultaneously, it’s important to recognize that a segment of this generation possesses a keen grasp of personal finance and investments, which the earlier ones were unaware of. Contrary to common belief, financial freedom transcends monetary measures. True financial freedom entails the ability to pursue one’s passions, dictate one’s work schedule, and prioritise quality time with loved ones, ultimately fostering a sense of fulfilment and happiness.
So What changes?
The transition from Baby Boomers to Gen Z has spurred significant transformations in lifestyle, spending behaviours, and industry dynamics. From embracing entrepreneurial pursuits and extravagant spending to grappling with the influence of social media and the weight of student loan debts, Gen Z confronts a multifaceted economic landscape. However, amidst these complexities, there emerges a glimmer of hope as some within Gen Z exhibit a growing awareness of personal finance and investment strategies, hinting at the potential for enhanced financial literacy and sustainable financial practices.
This blog delves into a myriad of topics showcasing these notable shifts, drawing insights from diverse contributors representing various backgrounds and perspectives. I extend my sincere appreciation to each contributor for their valuable insights and contributions.
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