Millennials and Gen Z’ers Are Emotional Spenders—Here’s How to Kick the Habit

According to a new study done by Credit Karma, Millennials and Gen Z are emotional spenders. We spend when we’re depressed and we spend when we’re bored, but most interestingly, we spend when we’re happy. And apparently we’re not alone. The study also reports that 39 percent of overall Americans identify as emotional spenders and of those emotional spenders, 58 percent of Gen Z and 52 percent of millennials agree with that sentiment. If these statistics are making your eyes bulge and stomach drop, we’ve got you covered. Read ahead to understand the risks of emotional spending and how to develop healthier habits to curb the ‘Add to Cart’ urge.

Meet the Experts: 

• Dr. Traci Williams, PsyD, is a Doctor of Psychology certified by the American Board of Professional Psychology as well as Certified Financial Therapist (CFT-I™️) by the Financial Therapy Association (FTA). In addition, she is the founder of Healthy Wealthy Roots, which provides support for mental, emotional and financial health and has been working for well over a decade with people of all ages.
• Courtney Alev, the Associate Director of Product at Credit Karma, a Consumer Financial Advocate at Credit Karma and oversees Product Managers at Mint, a popular personal finance application to help consumers cultivate healthy spending habits.

In the context of Credit Karma’s most recent survey and study, emotional spending is defined as spending “money to cope with emotional highs and lows.” This can present itself in a variety of ways. Maybe it’s your daily trip to Starbucks at 8:35 am on the dot (to give you that pick-me-up you need) or the pint of Ben and Jerry’s that you buy yourself after a tough day at the office. It could also be that feeling of instant euphoria you get after splurging on a bunch of new products during a super sale or on an overpriced hair styling tool as a gift to yourself for the promotion you just scored. Or maybe that funky wall art you found on Etsy at three in the morning when you couldn’t fall asleep…Even though these purchases are seemingly small, they add up.

Unfortunately, emotional spending and impulse buying spike in younger generations, with “58 percent of Gen Z and 52 percent of millennials say[ing] they are emotional spenders, compared to just 19 percent of respondents aged 59 and above (Boomers+).”

Some experts think this might have to do with the fact that more traditional investments like homes, are increasingly out of reach for young Americans. In fact, according to a 2022 housing affordability study done by Bank Rate, “Among adults who don’t own a home, the primary reasons are not enough income (43 percent), out-of-reach home prices (39 percent) and being unable to afford a down payment and closing costs (36 percent).”

In other words, perhaps one of the reasons we choose instant gratification is because we know that we won’t be able to afford things like homes in the future and buying that surprise makeup palette gives us a sense of ownership and control over our finances in ways that we believe aren’t available to us in the long run.

We chatted with Dr. Traci Williams, psychologist and founder of Healthy Wealthy Roots. Here are three of her best tips to keep those spending urges in check:

• Find Other Kinds of Mood Boosters 

Dr. Williams explains, “The reward system of the brain is complex, with multiple components. Dopamine is a key neurotransmitter in the reward process. We produce dopamine when we engage in behaviors meaningful to us and the dopamine boost motivates us to keep doing those behaviors. It is also closely linked to forming addictions. Replacing shopping with other dopamine-producing behaviors can help stop the habit of emotional spending.” Think: joining a weekly art class, taking up roller skating, learning how to knit, you get the idea.

• Make It Harder to Spend Money

Dr. Williams recommends putting up obstacles and barriers in order to get you to stop and think about any purchase you’re about to make. For instance, she suggests removing autopay options from your shopping accounts and your computer or putting spending limits on your credit card or blocking charges over $100 per transaction. If none of these tactics work, you can also plan ahead and budget for emotional spending by setting aside money from each paycheck toward ‘treat yourself,’ purchases.

• Follow Gen Z’s Lead: Try Psychotherapy

The root cause of most emotional spending is, well, emotions. And what better way to get a handle on your own emotions than talking with a professional? “According to the Credit Karma study, more than half of respondents would rather spend money on retail therapy than actual therapy to cope with their emotions. However, Gen Z bucks this trend, stating they’re more likely to prioritize therapy.” In other words, buying that Dyson Airwrap on a whim might feel good in the moment, but working towards uncovering the root cause of the emotional spending will be better for your mind and wallet in the long run. And while you’re at it, it may be beneficial to ponder financial therapy, a rapidly growing practice that involves financial planning combined with psychotherapy that “helps people outline and pursue their financial goals by also considering how they think about, feel, and behave with money,” according to Dr. Williams.

The short answer is yes–but really only if you budget in advance for that or have control over your emotional spending. This might mean setting aside some extra cash in case of spur-of-the-moment feelings, or identifying emotional spends and saving up for them over a period of time.

Courtney Alev, the Associate Director of Product at Credit Karma, suggests, “If you’re an emotional spender, try pausing before making a purchase and consider how you’re feeling. Are you buying the item because it’s something you really want or need, or are you buying the item to offset how you’re feeling?”