The Next Generation

Gen Z and Debt

While it might sound absurd to raise the topic of debt since the youngest Gen Zers are only 10 years old, it’s never too early to look to the future. With the cost of living on the rise1, wages remain the same. University tuition is raised each year and for many, the prospect of becoming a homeowner is a distant dream.

Gen Z encompasses those born from 1997-2012, an age group that has grown up on both the luxuries and harsh realities of technology. With a myriad of resources at their fingertips, Gen Z has the potential to be the most financially literate generation ever. We may scoff at the educational value of YouTube and TikTok, but a lot can be gleaned if you look in the right places. There are two sides to every coin—you can watch a video of a girl flaunt making a minimum payment on her credit card, just as easily as you can watch another girl explain why you should open a Roth IRA now. Technology is not inherently good or bad, and while many have gone into debt due to targeted advertisements and influencer sponsorships2, it also provides plenty of resources that nurture education3

Alongside technology dictating the habits of many Gen Zers, the impact of the 2008 financial crisis cannot be discounted. Senior Enterprise Consultant at Experian Gavin Harding said, “Gen Z grew up during the Great Recession. After seeing the hardships their parents went through, many are determined to pave their own way.”

And while paving their own way might give rise to an extremely entrepreneurial generation, financial literacy is key. Even if Gen Z better manages and budgets, many will still enter into the debt cycle, but they will also be empowered to resolve that debt.

Currently, the majority of Gen Z debt comes from credit cards4, a statistic that is likely to shift as more Gen Zers enter college and take out student loans. Similar to Millennials, Gen Zers avoid phone calls and it is reasonable to assume that they will prefer to handle debt through digital channels as well. 

Though it is impossible to predict the full extent of debt for a generation that is still in middle school, we can observe trends and plan the best way to accommodate future financial resolution. 

In an increasingly digital world, it is imperative to have digital solutions. Incorporating multiple platforms through which consumers can resolve debt has been a game changer for digital generations. Millennials prefer digital channels, and Gen Z will as well, at an even higher rate. 

Gen Zers are digital natives, as such 95% use a smartphone5. Additionally, over one third of Gen Z transactions are made on a mobile device. The figure below demonstrates not only the power, but the necessity of connecting with this generation through the platform that they feel most comfortable: often text and email. 

Additionally, these digital tools will need to satisfy tech-savvy users. Gen Z has been signaling for years that their preferred communication channels are digital and MRS has been listening.

Though the majority of Gen Z has not yet entered adulthood, they are the future, and we must be thinking about how they will operate and how to best service them. 

Recognizing the needs of burgeoning Gen Z is crucial. MRS is a forward thinking business, with innovation and customer care at the core of everything we do. We know that stagnancy is defeat and good for now is not good enough. MRS continues to pioneer digital solutions that create real results. We know we’ll be ready for the next generation—will you?

Sources:

1 https://www.wsws.org/en/articles/2021/06/11/cols-j11.html

2  https://www.vox.com/the-goods/22436051/social-media-credit-card-debt-instagram-tiktok

3  https://www.opencolleges.edu.au/informed/other/social-media-usage-provides-educational-benefits-research-shows-4836/

4 https://newsroom.transunion.com/gen-z-drives-credit-card-industry-rebound/#:~:text=Consumer%20performance%20has%20remained%20strong,0.5%25%20YoY%20to%20%24727%20billion

5  https://99firms.com/blog/generation-z-statistics/#gref