The news: Gen Z has little financial cushion, but the generation isn’t pulling back on discretionary spending, per Bank of America Institute data.

Gen Zers have accelerated spending across nonessential categories such as beauty, jewelry, coffee, and travel, despite having the lowest savings-to-spending ratio of any generation. For example, jewelry spending among Gen Z households was up nearly 11% YoY in June.

That may reflect the unique financial position Gen Zers find themselves in. With only 4.5% of Gen Zers owning a home, per a Clever Real Estate analysis of US Census data, many are deciding to splurge on smaller indulgences even as major financial milestones remain out of reach.

The behavior aligns with the “lipstick effect”—when consumers pull back on big-ticket purchases but make room in their budgets for smaller, affordable luxuries. Gen Z’s average spending per transaction on “little treats” such as ice cream and baked goods grew more than twice as fast as its overall spending per transaction in June, per Bank of America Institute.

Zooming in: A willingness to splurge doesn’t mean Gen Z spends indiscriminately. Half of this cohort think about what’s in their cart for two or more days before making a purchase, double the 25% of baby boomers who wait that long, per an RTB House survey.

That deliberation reflects a broader definition of value. When asked what drives their clothing choices, Gen Z is roughly in line with the general population on price and value for money, but overindexes on factors such as design (41% of Gen Z versus 33% of the general population), fashionable clothing (26% versus 19%), and sustainability (18% versus 13%), per YouGov. In other words, price matters, but Gen Zers may be willing to pay a premium for products that align with their tastes or values.

Social media plays an important role in shaping those perceptions. Gen Z overindexes on social media usage and consumes an outsized share of influencer content that introduces brands and highlights product attributes. TikTok, in particular, is a cultural epicenter and powerful discovery engine for adult Gen Zers.