Manila-based culture writer, consumer researcher, and content strategist, Angel Martinez runs a weekly column with PhilSTAR Life, where she initiates conversations around Gen Z behaviours and issues. Her pieces on identity, the internet, and their intersections have been published in 

, and Business Insider, and commissioned by think-tanks including Crowd DNA and Forge Futures. Outside of work, she can be found reading her book of the week in any cafe that serves iced matcha lattes.

In the turbulent economic environment, money is losing its value. Consumers are reevaluating their spending across sectors. With a looming crisis of trust in financial institutions, how are people managing their budgets? And how can brands navigate the complex relationship between value and cost?

Critical Spenders

If there’s one thing we can easily observe about South Korea through K-dramas, it’s that the nation is obsessed with opulence. From cult favorites like 

controlling major conglomerates and living in houses the size of school campuses. This observation isn’t entirely wrong – South Korea has a conspicuous display culture where showing off luxury items is accepted by most people and something to aspire for. 

The Korea Times

So, for outsiders looking in, it may come as a surprise that the country is in crisis, with younger generations unable to afford the lifestyle expected of ambitious high achievers. In mid-2024, the Bank of Korea reported a significant rise in the cost of living, noting that food prices in the county had surged to 55% above the OECD average. 

Business Korea

This comes as 40% of Korean youth reportedly have incomes that fall below 50% of the median. 

The Chosun Daily

South Korea’s economic growth decreased to 1.4% in 2023 due to waning demand for exports, geopolitical concerns and trade restrictions, and skyrocketing inflation. While this rate is projected to pick up towards the end of 2024, the country’s working-age population has also begun falling, which could have longer-term structural impacts on the economy. 

East Asia Forum

As interest rates and living costs soar and job opportunities plummet at an equally alarming rate, many individuals believe upward mobility is the only way forward, allowing money to dictate their career choices, personal relationships, and sense of self. In fact, 19% of Korean respondents to a 2021 survey cited ‘material wellbeing’ as their source of meaning in life. 

Asia News Network

The pressure to conform to a certain lifestyle is contributing to rising debt rates among young people as well as increasing delinquency rates in the $63 trillion world of shadow banking, or lending conducted by unregulated institutions. 

Bloomberg

 Now on the brink of economic collapse, more and more Koreans are embracing the YONO (‘you only need one’) life, prioritising essential purchases and skimping on the luxuries in life while also taking out loans to fund their lifestyles. Younger generations, in particular, are opting for a different strategy compared to their parents, leveraging investments over passive penny-pinching. How can South Koreans survive while in the throes of another recession, and what role can brands play in such times?

South Korea is often celebrated for its economic success over the past 60 years, but since the Asian financial crisis of 1997, inequality has grown increasingly prevalent. This disparity hit a record high in 2022 when the nation’s richest 20% had 64 times the average wealth of the bottom 20%. 

The Washington Post

Now, Korea’s Gen MZ (a collective term used locally to refer to Gens Y and Z) seems to be lagging behind in achieving traditional life milestones, such as starting families and purchasing homes. According to a 2022 report, more than half (55.6%) of the youth population in Seoul faced asset poverty, or the lack of sufficient liquid assets to cover their basic needs for three months. 

The Straits Times

“With inflation – especially skyrocketing house prices – a large portion of young people cannot see a chance to own a house with the low income and wealth they have, which is different from what their parents experienced,” says Dr. Gilbert Park, an assistant professor of finance and an assistant dean of undergraduate programmes at Willamette University. “They’ve also given up on marriage now that it has become harder to meet the expectations brought by another party in their lives.” 

Interview with Gilbert Park conducted by the author

South Korea’s NH NongHyup Bank analysed customers’ credit and debit card transaction data between January 2022 and June 2024, revealing that the number of transactions for out-of-home dining among people in their 20s and 30s decreased by 9% in the first half of 2024 compared to the same period in 2023. Meanwhile, spending on convenience store food increased by 21%. 

South China Morning Post

 “There is less need to earn more money because those who do not feel like they will succeed give up and try less hard. The income level of those [people] falls, and savings and consumption levels fall together,” says Dr. Park. 

Koreans are trying a slew of saving techniques for higher chances of success, whether that’s adopting a YONO lifestyle as opposed to YOLO (you only live once), packing lunchboxes instead of eating out, and even physically withdrawing cash and stuffing it into designated envelopes to reduce the chances of overspending. 

The Nation

 But the most reliable way of setting money aside has always been going to domestic banks, which have historically been heavily regulated by government authorities, with some “acting as channels through which government policies are implemented,” says Dr. Seongjin Park, an assistant professor at UNSW Business School. 

Interview with Seongjin Park conducted by the author

 Consumer trust and commercial performance among traditional banks have remained high thanks to generous interest rates, encouraging an uptick in savings.

However, digital banks are gaining market share after South Korea permitted their operations as a way of spurring competition. 

Financial Times

 “These newcomers offer convenient online services that compete directly with more established institutions, and they have also begun expanding into more substantial loan markets. As they offer loans at lower interest rates, they successfully gain a larger share of the market.” says Dr. Seongjin Park. 

, for instance, offers credit loans for mid- to low-credit borrowers. On the other hand, KakaoBank allows prospective customers to set up an account in seven minutes instead of the usual 20-30 minutes and was also the first to waive ATM and transfer fees. 

These new entrants are more attuned to the preferences of South Korea’s Gen MZ – in 2022, 90% of them said they used contactless channels like mobile phones for financial transactions, as opposed to just 40% who’d visited a physical bank in the previous three months. 

The Korea Economic Daily

Korea’s household savings have plummeted to the lowest figures in a decade, primarily due to borrowing behaviours at the height of the pandemic. 

Korea JoongAng Daily

 “Many people bought houses at record-low rates, but the rapid drawdown in the expansionary monetary cycle is leading to higher interest burden and a corresponding decrease in disposable income and overall decrease of household purchasing power,” Kim Wanjoong, the chief economist at the Hana Institute of Finance, told 

These burdens drove the total credit balance to ₩1,896.2 trillion ($1.42 trillion) in Q2 2024 – the highest figure ever recorded by the Bank of Korea. 

Despite dismal economic conditions, Koreans continue their quest to outwardly exhibit social standing. In 2022, spending on personal luxury goods nationwide grew by around 24% to $16.8 billion, with fashion houses like Moncler, Cartier, and Prada emerging as the top performers. 

CNBC

Parents have also started investing in private after-school classes for primary, middle, and high school students, with total related expenses increasing by 4.5% between 2022 and 2023. 

Amid a sharp rise in delinquency rates among small business loans to afford such purchases, Koreans have leveraged the power of community to foster accountability. Mutual funds called 

groups require members to contribute ‘club dues’ of between $10 and $50 a month and decide how to spend the accumulated balance together. 

The New York Times

“The presence of others reinforces a person’s will and performance on a task known as the social facilitation effect,” says psychology professor Kwak Geum-joo. “Keeping habits of thrift is a challenging task, so people have created fun ways of doing it together.” 

 Relying on trusted individuals is so deeply embedded in Korean culture that KakaoBank offers a 

 product, whereby a designated holder can share their account with friends. Previous government administrations have also extended assistance to financially vulnerable demographics through products like Youth Hope, which allows young adults to accumulate assets through high interest rates. 

Considering that three out of ten Koreans surveyed in 2022 did not have a financial goal and 17.9% felt that simply sustaining their living is a burden, non-essential commodities could suffer amid an uptick in saving behaviours. 

 “High-end luxury brands will have no problem – unless they want to increase their consumer base. But brands that are not at the high end could benefit from introducing less expensive lines to attract more customers,” says Dr. Gilbert Park. 

 GS25, one of the nation’s largest convenience store chains, reintroduced its previously discontinued Kim Hye-ja lunch box at ₩4,500 ($3.50), with additional discounts bringing total costs down to $2.00. 

Sedaily

Meanwhile, discount store chain Lotte Mart has downsized portions of groceries and food items, selling meat, rice, fruits, and vegetables in single-serving portions. 

South Koreans are considered above the OECD average in terms of financial knowledge, with a collective score of 76 points. However, their financial attitudes are not on par with the rest of the world due to their tendency to ‘prefer consumption to savings’. 

Maeil Business Newspaper

 “One example of [this] is how younger generations in Korea have taken on significant loans to purchase assets, which may cause them to face higher risks of default when the economy enters a downturn,” says Dr. Seongjin Park. 

 Traditional institutions can bank on the reputation they’ve built to introduce products and programmes that fill the knowledge gap. After all, South Koreans display one of the highest levels of trust in financial institutions, with an index score of 2.6 out of four. 

Statista

OK Savings Bank has produced short films on YouTube with themes like recycling, cooking, and other issues to capture the attention of younger generations, while Welcome Savings Bank has an entire series on the same platform featuring investment tips using seed money. 

The fact that 23.3% of Koreans report feeling isolated from others at a time when single-person households are on the rise is no coincidence. 

 Financial troubles also fuel the loneliness epidemic, imbuing community initiatives with a dual purpose. “People have started seeking out thrifted products over the past few years, which could also increase the likelihood of interaction with others,” says Dr. Gilbert Park. 

 True enough, online flea market app Danggeun (which translates to ‘carrot’) has more than 19 million monthly users. 

 Young South Koreans have also created online 

 forums where they share stories of daily expenditures and harshly encourage each other to save. 

khan.co.kr

 In a strange way, this generation is able to make light of their bleak financial outlook by gamifying thriftiness.

Three out of ten Koreans surveyed in 2022 did not have a financial goal and 

 felt that simply sustaining their living is a burden

 of Korean respondents to a 2021 survey cited ‘material wellbeing’ as their source of meaning in life

 of Gen Yers and Zers in Korea said they used contactless channels like mobile phones for financial transactions

With increasing living costs and debt defaults, many South Koreans can’t afford the aspirational life they strive for – but this doesn’t stop them from splurging on big-ticket purchases

Partly to blame for these purchasing decisions is a lack of financial understanding, driven by materialistic values and a preference for consumption over savings

Traditional and digital banking institutions, as well as community-led initiatives, are filling the gap through formal products and services and online accountability groups

Dr. Seongkyu ‘Gilbert’ Park is an assistant professor of finance and an assistant dean of undergraduate programmes at Willamette University, Atkinson Graduate School of Management. He completed his PhD in economics at the University of Chicago in 2015, and his primary research interests include market microstructure, derivatives, behavioural finance, asset pricing, hedge funds, mutual funds, and ETFs.

Dr. Seongjin Park is an assistant professor at UNSW Business School. He earned his PhD in finance from the University of Chicago Booth School of Business. Seongjin’s primary research interests include housing markets, household finance, financial intermediaries, and macroeconomics.

South Korea

Republic of Korea

Money

South Koreans love to spend. But what happens when the country faces a financial crisis? With many people steeped in debt, younger generations are now being forced to downsize their purchases and miss out on major life milestones. How can brands help them fight against economic headwinds?