Social media and impulse spending: a growing financial concern ahead of Black Friday

Insights from the European Consumer Payment Report 2024 highlight concerning patterns among Millennials and Generation Z, who are most influenced by social media adverts and increasingly reliant on credit to pay their bills.

The impact of social media on impulse buying

Social media platforms have become a powerful force in driving consumer behaviour, particularly among younger generations. Nearly half of Millennials (47%) and over half of Generation Z (53%) admit to making impulsive purchases after encountering social media adverts.

Countries like Switzerland (67%) and Ireland (65%) lead the trend in Europe, with flashy deals and targeted advertising amplifying the pressure to spend. 

Why social media drives overspending:

• Instant gratification: Seamless purchasing options reduce the friction of decision-making.
• Scarcity messaging: Adverts leveraging "limited-time offers" create a sense of urgency.
• Personalisation: Algorithms deliver tailored promotions that align with individual preferences.

These practices not only trigger impulsive spending but also encourage individuals to rely on credit or deferred payment options, exacerbating financial strain.

Credit dependency among younger generations

The financial vulnerability of young adults is further evidenced by their reliance on credit to cover essential expenses. According to the European Consumer Payment Report 2024, Millennials (44%) and Generation Z (37%) are the most likely to have used credit cards or borrowed money to pay bills in the past six months. This reliance is significantly higher than older generations, such as Boomers (33%) and the Silent Generation (21%).

The cycle of financial strain:

• Impulse purchases: Social media and Black Friday deals lead to unplanned spending.
• Credit use for essentials: The financial burden of overspending pushes young consumers to rely on credit.
• Debt accumulation: High-interest rates on unpaid balances create a long-term debt cycle.

Addressing these issues requires a collective approach. While consumers bear some responsibility for managing their financial habits, businesses and policymakers must play a critical role in creating an environment that fosters financial literacy, responsible advertising, and access to safe and transparent financial tools. By working together to mitigate the societal impacts of impulsive spending and credit dependency, we can create a more equitable and sustainable financial landscape.

A broader societal issue

The implications of impulsive spending and credit dependency extend far beyond individual financial struggles, creating challenges that ripple through businesses, the economy, and society as a whole.

• For individuals:

  Overspending and reliance on credit to cover bills and essentials can lead to a vicious cycle of financial strain, stress, and instability. With younger generations, such as Millennials and Generation Z, disproportionately affected, this trend risks delaying key milestones like homeownership, building savings, or achieving financial independence. The long-term effects on mental health are also concerning, as financial stress is one of the leading contributors to anxiety and depression.

• For businesses:

  While impulsive purchases can boost short-term sales, the broader picture reveals significant risks for retailers and service providers. Higher return rates stemming from buyer’s remorse, coupled with increased reliance on deferred payment methods like BNPL, can negatively impact cash flow and profitability. Late payments and defaults from overburdened consumers further exacerbate these challenges, threatening financial stability for businesses that rely on consistent revenue streams.

• For the economy:

  At a macro level, the rising prevalence of consumer debt poses risks to economic growth and recovery. As younger generations take on more debt to sustain their spending, their ability to contribute to the broader economy diminishes. A culture of debt-fuelled consumption undermines financial resilience and can increase dependency on social support systems, placing additional strain on government resources.

• For society:

  On a societal level, these trends perpetuate inequality. Vulnerable groups, such as lower-income individuals or young adults starting their financial journeys, are disproportionately impacted by these financial behaviours. The ease of access to credit, combined with aggressive advertising that targets impulse-driven decisions, often leaves those with the fewest financial resources struggling the most. This contributes to a widening gap between those who can manage their finances sustainably and those who cannot, increasing societal divides and reducing economic mobility.

A call for action

As the shopping frenzy of Black Friday looms, the financial habits of Millennials and Generation Z demand attention. With social media driving impulse purchases and credit use on the rise, businesses, policymakers, and individuals must take steps to foster a more sustainable approach to spending. Only through collective effort can we break the cycle of overspending and debt, paving the way for a more financially secure future.