This past Thursday, J.D.Roth of Get Rich Slowly wrote an interesting post where he asked if there was a generation gap in spending?
The post itself got me thinking but it was all of the discussions under the comments section that really got me motivated to write about this topic.
Obviously I can not be upset with any analysis that is made of generation Y because I’m a weird very-early-20-something that actually writes about money. Unless you’re a Journalism Major, chances are you hate writing (especially about money management). But before I digress and my mind starts wandering off as usual, back to the topic- are twenty-somethings not saving money?
Let’s look at some of the banking issues for 20-somethings:
Extravagant amounts of fees
Banks are nickel-and-dime-ing us worse than the night clubs we go to on Saturday nights. If you don’t have money in your bank account you would logically assume that the bank would stop your debit card purchase. That’s not what happens. The bank allows the transaction to go through and your account goes into a negative (overdraft). On top of this negative balance you are also charged a fee for the overdraft. No wonder banks love young people.
High yield savings accounts online have become the better option
Gone are the days of brick-and-mortar and present are the click-and-mortar banks. Most of my friends that have a traditional bank account only keep them intact because the bank is right around the corner from their home and because they need a checking account. These days every employer provides its employees with direct deposit payment. This makes an online high interest savings account even more attractive because you don’t want your money sitting in a traditional bank account where it earns you 0.01% or some minuscule number. So if banks notice that young people are pulling out money from their bank accounts, it’s likely because they are transferring it to their brand new online savings account.
Now it’s time to look at the spending money aspect of this equation:
Plethora of options for spending money
Twenty somethings do not by any means have a shortage of ways to spend money. It’s one thing that there’s a coffee shop and fast food spot on every corner, but what amplifies this issue is that now you do not even have to get out of bed to spend money. Online shopping has literally made it idiot proof for anyone to buy anything they want.
Spending money has become increasingly convenient
Whenever I go on Amazon or any other online merchant site that I use, all of my information is conventionally stored. I usually don’t even have to type in any information again. To make a purchase I just need to add the product to my “virtual cart” and then “checkout.” A few clicks and two days later, my doorbell is ringing with a new purchase literally right at my door. Of course the onus is on the individual to practice self control. If you do have a mental lapse it is very easy to splurge at ease.
Traditionally “small” fees are increasing
To take the bus one way in my city is $2.75 (and slowly rising). A pack of cigarettes (if you smoke) is about $10. Parking by my college is about $12. A beer is about $5 (and I know you don’t go to bar for just one beer). Gas prices are on the rise. Car insurance is not getting any cheaper. I will stop the list here. If you net $500 weekly after taxes, your earnings may go towards covering small purchases here and there.
(Don’t yell at me. I know this a basic discussion and inflation was omitted for simplicity purposes.)
The Debit/Credit card generation is here…
And cash is slowly fading away. A few weeks ago I spent a few hours with a buddy from school in between classes and for study sessions. As the day went on I noticed that he literally purchased everything with his debit card. I mean everything. Coffee, lunch, bus tickets, as long as it was accepted. This can be a great idea if you download your bank statement and meticulously go over your purchases. Unfortunately, it can be a horrible idea if you rarely check your bank account and don’t feel like your spending money because all you do is swipe.
Of course you can argue that it is more of a credit card generation than it is a debit card era, but either way it’s a generation of people using plastic to cover purchases.
At the end of the day 20somethings may not be saving as much money as they should be. However, certain aspects of personal finance have improved. The money that we do save is held in high yield savings accounts. Many facets of our personal finance system are automated. We have access to our financial information from home. Many of us earn money online. It is just becoming a matter of learning to say no to the overabundance of options that come our way.