In the five years since the COVID-19 pandemic began, so much about the world has changed—especially for Gen Zers, many of whom have gotten their first jobs during that time and have increased their spending.
For consumer brands and retailers, understanding Gen Z consumers and their spending behaviors presents a host of opportunities. That’s one of five takeaways that McKinsey Senior Partner Becca Coggins and coauthors identify in the State of the Consumer 2025 report, which focuses on the biggest consumer shifts that have emerged since 2020.
Gen Zers are projected to make up not only the largest but also the wealthiest generation in history. The authors note that in the United States, the average 25-year-old Gen Zer has a household income of $40,000, which is 50 percent higher than the average baby boomer’s income was at the same age (accounting for government transfers, inflation, and taxes). Gen Z spending is also growing twice as fast as previous generations’ spending did at the same age and is expected to eclipse baby boomers’ spending globally by 2029, according to the report.
These data are compelling, to be sure, but there’s more to the story. While they may have cash in their pockets, Gen Zers across the world say they feel stressed about their finances (contributing to this stress are a sustained period of high inflation, increased living costs, and high levels of student debt). Their concerns about money have also affected how they view life stage milestones, the State of the Consumer research finds. Gen Zers are less likely than older generations to define themselves according to whether they get married or have children and are much more likely to define themselves based on achievements related to financial security (such as career success and wealth creation).
Despite their financial worries, Gen Zers still prioritize spending, the report finds. They are more willing than older consumers to splurge and take on debt. Additionally, they are more inclined to buy on credit (13 percentage points higher than other generations on average) and to use “buy now, pay later” services (especially Gen Zers in China, India, and the United Arab Emirates).
To seize the Gen Z opportunity, consumer-facing businesses can create and communicate about products and services that Gen Zers deem splurge-worthy—which usually means it’s on trend or a Zoomer’s peers have talked about it. To that end, investing in AI and machine learning tools to help develop a better understanding of what Gen Zers value is key, Coggins and her coauthors find. One thing Zoomers will pay a premium for, for instance, is convenience.
Gen Zers are not just coming of age; they’re coming for the checkout with unprecedented spending power. |
