How TikTok is wiring Generation Z’s money brain

Caitlyn Sprinkle, 27, describes her TikTok feed as a mix of economic gloom and out-of-control consumerism. There are Dave Ramsey TikToks warning of the evils of debt, followed by influencers showing off their groceries full of skincare products and handbags.

Sprinkle, a financial analyst at a wealth management firm in Nashville, Tennessee, has been using a budgeting app and cooking at home lately to save money — and to afford the things she thinks she needs to buy, like Lululemon leggings. . “Between TikTok and having your friends around you, you’re pressured to buy the things because you want to fit in,” she says. “That has always been the case, but with TikTok it is more prominent.”

Rising stocks, rising wages and a tight labor market indicate the economy is stronger than it has been in years. The youngest, lowest-earning professionals don’t think so — partly because a large portion have consumer debt, and partly because of what they see on TikTok.

Even as the platform faces a possible ban in the US, it remains a huge cultural force shaping the decisions and views of young adults. More than half of all U.S. adults ages 18 to 34 use it, while about a third of those 29 and younger regularly get news on TikTok, up from less than 10% in 2020, according to the Pew Research Center.

So what happens when your main news source tells you that no one in your generation will be able to buy a house, food prices are out of control and credit card debt is inevitable – but also that $2,500 Louis Vuitton bags and $70 moisturizers are, like many videos say, “a must”?

Interviews with financial experts and more than a dozen young adults show the result is confusion, with a hint of gloom. Young people under thirty are taking on debt because they embrace an old idea: if the prospects are bad, why not enjoy life now?

Their own money behavior

TikTok is creating a gap between how good young adults are actually doing and how they think they are doing, according to economists and twenty-somethings themselves. This disconnect has given rise to a term financial advisors use to describe young adults’ warped views of their financial well-being: “money dysmorphia.”

Evelyn Hidalgo, 29, makes a living as a full-time content creator after being laid off as a social strategist about a year ago. While she posts about motherhood on a budget, her TikTok feed often shows her trendy items she wishes she had, or a life that seems impossibly far from her own, like owning a big, beautiful house.

“It doesn’t feel like the norm is your normal,” said Hidalgo, who lives in Nashville with her husband and 20-month-old son. When she looks at the economy on TikTok and other social media, her feed feels “split in half,” between those living enviable lives and those struggling.

Gen Z’s mixed economic feelings could have an effect on the outcome of this fall’s election, but a bigger impact could be on their long-term financial health, economists say. Feeling financially insecure can lead to bad choices, such as credit card debt that eats into retirement funds and necessities like food and housing, says Jacob Channel, senior economist at LendingTree, an online lending marketplace.

According to LendingTree, members of Generation Z – born between 1997 and 2012 – have essentially doubled their non-mortgage debt over the past two years, receiving an average of about $11,000 extra.

Still, younger American adults — those born in the 1990s — saw their average wealth more than quadruple to more than $40,000 between 2019 and 2022, according to the Federal Reserve Bank of St. Louis. That has surpassed the growth rates of previous generations at the same age, says Lowell Ricketts, a data scientist there.

While many hallmarks of adulthood, such as homeownership, may seem out of reach, young adults are reaping the benefits of the current economic climate, said Monique Morrissey, senior economist at the Economic Policy Institute, a nonprofit economic research and policy organization.

“Gen Z and younger millennials have a tailwind and may not realize they are benefiting from a tight labor market that has led to unusually rapid growth in real wages for younger and lower-paid workers,” she says.

Adding to the confusion is the economy itself. After a series of data shows that the labor market is strong, growth begins to slow. U.S. employers added a seasonally adjusted 175,000 jobs in April, fewer than in March and fewer than the 240,000 economists expected, and the unemployment rate rose to 3.9%, the Labor Department said.

Keeping up with the Joneses

Many TikTok users say their feeds have become a loop of “get ready with me” posts, ads, influencer partnerships and videos encouraging them to buy things from TikTok’s virtual store. About 91% of Gen Zers say they have purchased something they saw on social media, according to a survey by Citizens Pay, a buy-now-pay-later service from Citizens.

BreAunna Rodriguez, a 23-year-old mother of two in Houston, likes to buy TikTok-popular baby clothes and other little things for herself, including eyelash extensions, coconut oil mouthwash and a pumice stone that influencers say reduces stretch marks.

“It’s hard not to buy things when they say it’s good for me,” she says.

TikTok has also influenced bigger decisions, she says. Her For You page is full of young entrepreneurs who reject the idea of ​​a 9-to-5 job. This inspired her to leave her job as an assistant property manager at the end of 2022 and take a remote, commission-based job with an internet and cable company.

“You see a 19-year-old trader on TikTok who only has to work two hours a day, and I’m like, ‘How do I do that?’”

Rodriguez says she is now making more money, contributing to a 401(k), paying off her credit card bills every month and putting her annual tax refund into a savings account to help with expenses throughout the year. Her largest monthly expense is the $2,000 she pays for child care for her two children.

The constant videos of consumption – whether it’s a Stanley cup, a Jellycat plushie or makeup – are hard to resist. TikTok created its own e-commerce engine, TikTok Shop, last year to compete with online retailers.

About six months ago, Sprinkle bought a Stanley cup. “I held on as long as I could,” she says, adding that she bought several other water bottles that were popular on TikTok.

“There’s an internal pressure among my age group to constantly have these experiences and share them,” says Evan Naar, a 28-year-old lawyer in New York who posts TikToks about Broadway shows he’s seen and a Taylor Swift concert that he attended.

Naar, who has several thousand dollars in student debt, says she wants to save more money and buy a house at some point. “A large portion of my salary goes toward living expenses, travel and Broadway shows,” he says.

Okay, doom

Encountering post after post about the downsides of economics contributes to “doomerism” – an overwhelming sense of despair. This has made some young adults frugal.

“I’m not going to spend my last dollar trying to keep up with the Joneses,” says Tanayah Thomas, a 23-year-old clothing designer and certified financial advisor in Staten Island, NY. “We have to prepare for what is to come. “

She currently lives with her mother to save money.

Tommy Chanthavong, a 27-year-old from Houston who manages social media accounts for small, local businesses, also moved back home. He says it’s hard to parse the information on TikTok: One minute he sees videos saying the U.S. is on the brink of a recession, and the next he sees inflation slowing.

In The Wall Street Journal’s latest quarterly survey of business and academic economists, respondents cut the likelihood of a recession within the next year to 29% from 39% in January – the lowest likelihood since April 2022.

Sprinkle, who shares an apartment with a roommate, says she would like to own a house one day, but it feels like a distant dream.

“You have to have a certain amount of happiness, and being able to do the things you want and buy the things you want is part of that,” she says. “Am I saving all my money for the future? No. I try to live more in the moment.”

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Write to Ann-Marie Alcántara at [email protected] and Julie Jargon at [email protected]