Financial peer pressure

Money can be a contentious topic in social circles, and sometimes a cause of rifts between friends. Millions of Australians have fallen prey to financial peer pressure, causing some to go into debt or spend beyond their means.

From shiny new cars to fancy cocktails, our research uncovered what Aussies are buying to keep up with their friends and how much it's costing them.

How many people have experienced financial peer pressure?

A Finder survey of 1,000 respondents found 47% of Aussies have felt pressured to spend money because of pressure from their social circle.

Young people are the most susceptible to overspending with friends. Around 69% – or two-thirds – of millennials (Generation Y) and 64% of Generation Z have spent money because of those around them, compared to 23% of baby boomers.

Women (50%) admit to experiencing financial peer pressure more than men (43%).

What do people feel pressured to spend money on?

More than a quarter of Aussies (28%) have felt forced into splitting a restaurant bill evenly when they had ordered less food than others.

And 1 in 7 (14%) say they have been coerced into going on an expensive holiday with loved ones.

Another 9% have felt pressured into paying for someone else's bucks or hens night, while 7% have felt they had to fund a baby shower.

Some Australians even admit to buying expensive items like a nice car (8%), a home (8%) or designer items (8%) to keep up with their friends and family.

How many people have gone into debt to keep up with friends?

The research found 1 in 5 (22%) have gone into debt or spent more than they can afford because of the pressure to spend – equivalent to 4.3 million people.

Again, younger generations are more likely to slip into debt or dig into their savings to keep up with friends. More than a third of millennials (36%) and Gen Z (35%) admit to overextending themselves because of financial peer pressure, compared to just 2% of baby boomers.

Young people are less financially established than older generations and are more likely to experience social pressure to dress a certain way or travel to certain places.

How much is financial peer pressure costing people?

Among those who have overextended themselves to keep up with their social circles, the average debt stacks up to $1,216 over the past 6 months.

This increases to a whopping $1,298 for millennials and $1,258 for Gen X. For context, that's more than the average weekly wage in Australia. If you were to repay this debt over 12 months with the average credit card, you would fork out $259 in interest.

Men ($1,560) have overspent substantially more than women ($912) to keep up with friends and family.

How to deal with the pressure to spend money

Suggest budget-friendly alternatives. Next time you're asked to go to a fancy dinner or on a pricey holiday, try offering a more affordable alternative to show your friends you still want to spend time with them, but with a smaller price tag. If they want to get drinks, suggest going during happy hour. If they're keen on a beach holiday, find a travel deal that fits everyone's budget.

Share your money goals. If you're comfortable, sharing with your loved ones the reasons why you're being careful with money can get them on the same page as you. If they know you're saving for a house or planning on starting a family, they'll want to help you get there. Anyone who pressures you to spend more than you can afford is not a true friend.

Take a good look at your finances. If you find yourself overspending with friends, it might be time for a good old-fashioned budget. Money management apps – like the Finder app – can help you see your income and expenses all in a single place. This can help you figure out how much you need to save each month and how much you can afford to spend on "fun" things like clothes and cocktails.

Written by

Sophie Wallis

Analyst

Sophie Wallis is a senior insights analyst with a passion for data storytelling. She spends her time turning complex data into digestible stories and uncovering new consumer trends. When she isn't working, you'll find her planning her next overseas holiday or bingeing on a big novel. Sophie has a Bachelor of Economics from the University of Melbourne. See full bio