What is the friendship tax?

We all know the feeling. Your phone buzzes with plans for dinner, drinks, a concert, or a weekend getaway. Your heart says yes, but your bank account says, "absolutely not." That's what we call the friendship tax: The often-unspoken cost of maintaining an active social life that's quietly draining bank accounts and creating financial stress for many young adults.

The real cost of staying connected

According to a recent survey from Ally Bank, financial pressures are putting a serious strain on social connections, with 44% of Gen Z and millennials reporting that they've skipped major social events because of the cost.

Additionally, Ally's findings show that three out of five young adults admit social spending affects their financial goals, yet 69% still prioritize in-person hangouts with friends at least weekly.

It's a balancing act that feels impossible to master when you're trying to pay off student loan debt, save up to buy a home, or simply grow your savings while also trying to stay connected with friends.

The survey also revealed that on average, people spend $250 every month on social activities. That's $3,000 a year, or enough to build a solid emergency fund, cover several months of car payments, or fund a dream vacation.

The fear of missing out is real and measurable. Nearly a quarter of young adults say they worry about missing social connections due to financial restraints. This fear leads to a troubling pattern, as 42% of young adults report overspending on social activities several months out of the year, and 18% overspend every other month.

Why the friendship tax hits so hard

Part of the problem is planning, or rather, the lack of it. The Ally survey found that only 18% of Gen Z and millennials actually budget for activities with friends. Without a dedicated social budget, every invitation becomes a spontaneous yes that haunts you on your next credit card statement.

The friendship tax increases when social plans default to expensive options. Dinner out easily runs $50–60 per person when you factor in drinks and a tip. Concert tickets that were $30 a decade ago now cost $150 or more. Even "casual" brunches can set you back $40 before you've even finished your mimosa. Do this a couple times a week, and suddenly that $250 monthly average makes perfect sense — and starts feeling inevitable.

How to save money and keep your friends

The good news? You don't have to choose between financial stability and a fun social life. Here are some ways to reduce your friendship tax without becoming a social hermit:

Be honest about your budget

The first step is acknowledging that you need one. Decide how much you can comfortably spend on social activities each month without derailing your financial goals. When you hit your limit, you haven't failed; you've succeeded at managing your money.

Normalize talking about money with friends

The silence around finances creates pressure to keep up appearances. Start the conversation. A simple "Hey, I'm trying to save money this month. Can we do something that's cheap?" opens the door for others to admit they're in the same boat. Chances are, they'll be relieved you said something first.

Become the curator of creative, cheap plans

Stop waiting for others to plan everything. Take initiative and suggest alternatives: potluck dinners instead of restaurants, morning walks instead of brunch, game nights instead of bars, free events, picnics in the park , or volunteering together. When you're the one organizing, you control the price tag.

Employ the strategic "yes"

You don't have to attend everything. Prioritize events that matter most, such as the milestone birthdays, the friend you haven't seen in months, and the annual tradition that brings everyone together. Saying yes to what truly matters means you can say no to the rest without guilt.

The friendship tax is real, but it doesn't have to be inevitable. The key is to move from reactive to proactive. Focus on building a social budget, initiating affordable hangouts, and creating a friend group culture where talking about money isn't taboo. And remember, the late-night conversations, the inside jokes, the genuine connections never had a price tag anyway.