The Zillennial Paradox: Big Debt, Big Spending and a Conscience to Rule It All

• Zillennials are 90’s kids, the cross-section of younger millennials and older Gen Z.
• Zillennials are more likely to invest but also to have debt compared to the average consumer.
• Zillennials often prefer socially conscious merchants but still shop at big chains for groceries.

Zillennials — younger millennials and older Generation Z — are a micro-generation born between 1991 and 1999. Already a key group in the working world, they represent a growing wave of earning and purchasing power that will drive the economy in the coming years.

Zillennials are discerning consumers with different priorities from other age groups. For example, they are more likely to favor local shops and sustainable brands. PYMNTS Intelligence’s latest research finds they fit into four persona groups — budget minded, wealth builders, free spenders and givers — each with its own set of preferences. The study also looks at some of the core financial and spending behaviors of this group, including their investing habits and use of paid subscriptions.

• Generation Zillennial
• The Four Types of Zillennial
• Investing and Debt
• Subscriptions and Pay Later Plans
• Conscientious Consumers
• Conclusion
• Methodology

Generation Zillennial

The widely used generation groups can miss key trends because they are too big. In 2018, PYMNTS Intelligence defined bridge millennials, an important cross-section of younger Generation X and older millennials who often break from the molds of their two generations in shopping, spending and other areas. Now that most of Gen Z has entered their adult lives — its oldest members turn 27 this year — the time has come to focus on the latest key inter-generational bracket.

Enter the zillennials, who also break the mold. Forty-one percent of this group say that their household income is more than $100,000 per year, including non-wage sources such as support from parents or partners. Along with millennials, they are the cohort most likely to live paycheck to paycheck, at 77%. However, the share of zillennials struggling to pay their bills is slightly lower than the share of millennials or Gen X. This suggests typical zillennials may be better at handling their money than their older peers.

Notably, 39% of this group live in large urban centers. This rate is higher than seen among either Gen Z, at 33%, or millennials, at 37%, yet another way the zillennial cross-section breaks from these generations.

These are just some of the findings in “Generation Zillennial,” a PYMNTS Intelligence special report. This study looks at the spending, financial and lifestyle preferences of older Gen Z and younger millennial consumers. It draws on results from a survey of 3,090 consumers conducted from April 5 to April 26.

The Four Types of Zillennial

What zillennials would do with an extraordinary windfall reveals a lot about this generation.

To better understand differences across this group, PYMNTS Intelligence asked how they would use an unexpected windfall equal to half their typical monthly income. From there, each was placed into one of four persona groups: budget minded, wealth builders, free spenders and givers. Each persona has important characteristics and spending behavior patterns that banks, merchants and service providers should understand as they seek to reach key target segments.

Across the persona groups, most zillennials live paycheck to paycheck. Budget minded zillennials — the largest persona — are the most financially stressed. Eighty-eight percent live paycheck to paycheck, with 41% having issues paying their bills. On the other side, 61% of wealth builders live this financial lifestyle, with just 20% struggling to make ends meet. Notably, budget-minded and wealth builders tend to be relatively older. Free spenders and givers, meanwhile, tend to be relatively younger.

Sizeable shares of zillennials continue to get financial assistance from their parents. This is seen the most among givers, at 31%, though nearly 1 in 5 budget minded and free spenders receive help from home. Another key difference is the share holding a college degree. Wealth builders and givers, each at 45%, are about 10 percentage points more likely to have a college degree than either budget-minded or free spenders.

Investing and debt

Zillennials are more likely than others to have invested in the past month, despite also being more likely to have outstanding debt.

Zillennials are more engaged in investing than the average consumer. One-third have invested in assets, including stocks, mutual funds and cryptocurrencies, in the last month, compared to 25% across the entire sample. Givers, at 46%, and wealth builders, at 44%, are especially likely to be investing. Meanwhile, 49% of high-income zillennials invested in the last month, hinting that others in this cohort will likely ramp up their investments as their incomes increase.

Zillennials are also more likely to carry unsecured debt, however. Eighty-two percent report that they carry balances in at least one type of debt, compared to 77% of consumers overall. The differences are particularly stark in a few categories. When it comes to student loans, 27% of zillennials have them, compared to 14% of all consumers. Zillennials are 58% more likely to have buy now, pay later (BNPL) plans. The budget minded are the most likely persona to carry balances in major credit areas, particularly credit cards, at 54%, and student loans, at 36%.

Subscriptions and pay later plans

Zillennials place a higher than average value on subscriptions and the ability to pay in installments.

Zillennials love subscriptions. Three-quarters paid for at least one monthly subscription — such as Amazon Prime, Walmart+, Netflix or Hulu — in the last month. This is 19% more than the average consumer. The rate varies little across persona groups but rises to 84% for those with high incomes. This suggests that this cohort overall will add more subscriptions as their disposable incomes increase.

Flexible payment plans are another service that this group finds especially attractive. One-third say that having the option to use pay later options — such as BNPL and credit card installments — has a very or extremely large impact on their choice of where to shop. This compares with 20% for the average consumer — a 39% difference.

Notably, zillennials with high incomes are slightly more likely than their peers to rate pay later plans as highly important. Cash flow management rather than an inability to pay upfront may explain pay later plans’ appeal.

Conscientious Consumers

Zillennials widely look at social and environmental considerations when choosing where to shop, but they still lean toward large chains for their groceries.

Zillennials tend to be socially and environmentally conscious. This plays a role in their shopping decisions. One-third say a business being local or community-owned is highly important. On the other hand, 26% of consumers overall say the same. PYMNTS Intelligence finds a similar trend when it comes to whether a merchant’s social values align with theirs. One-third of zillennials say whether a merchant’s social values align with their own significantly influences where they shop. Just 24% of consumers overall say the same.

Zillennials also value whether a business provides environmentally sustainable products and locally sourced goods: 43% say each factor is highly important. Zillennials are 27% more likely than the average consumer to say local products are highly important. They are 37% more likely than average to say environmentally sustainable products are highly important.

Givers and free spenders are likely to put social and environmental concerns first, with free spenders slightly less so. For example, 76% of givers and 50% of free spenders rate the access of locally sourced products as very or extremely impactful on their choice of where to shop. Conversely, budget minded are more pragmatic. About one-quarter say a business being locally or community owned or having aligned values is highly important. Roughly one-third say that the environmental characteristics of the products are highly important.

The social and environmental priorities of this group only go so far, however, in the face of budgetary reality. Thirty-seven percent of the cohort identifies Walmart as their top place to buy groceries, with little difference across the persona groups. Large national and regional chains occupy second and third place.

Conclusion

With their spending and earning power on the rise, this group will play a more important role in driving the economy. These younger millennials and older Gen Z groups often differ from those two generations in significant ways. They are more likely to move to urban centers and to invest, as well as more likely to have most types of debt. Zillennials are discerning shoppers. Many place a high value on social and environmental factors when picking where to shop. At the same time, many still buy groceries from big box stores. They are more likely than other generations to pay for common subscription services and use pay later plans. Merchants and service providers should pay special attention to high-income zillennials, who serve as a bellwether for the wider cohort as this group grows professionally and increases their disposable income in the years to come.

Methodology

“Generation Zillennial,” a PYMNTS Intelligence report, is based on a survey of 3,090 consumers held from April 5 to April 26. The report looks at spending, finances and lifestyles of older Generation Z and younger millennials. The analysis is based on a census-balanced survey of 2,090 U.S. consumers held between April 5 and April 28. To ensure there is sufficient data to analyze this generational group in depth, we also oversampled for another 1,000 consumers born between 1991 and 1999, for a total of 3,090 respondents. Population weights are used to ensure analysis remains representative of the U.S. adult population.