Millennials using mobile payments for transactions are more likely to overspend, pay credit card fees and use pricey loan services, says a new study from the Global Financial Literacy Excellence Center (GFLEC) at the George Washington University School of Business.
That shows that what’s fast and convenient may not always save you money, and may actually encourage bad money habits.
The study looked at more than 4,000 Americans aged 18 to 34 who reported using their mobile phone to pay for products or services by waving or tapping their phone over a sensor or using a mobile app during checkout.
Millennials using mobile pay services were much more likely to:
- have more consumer debt
- overdraft their checking account
- pay pricey credit card fees
- make premature withdrawals from a retirement account and pay penalties
Mobile payments systems, which simplify payments between friends and businesses, are here to stay. But many young people using mobile payments have lower levels of financial literacy, and as a result, are damaging rather than improving their financial situation.
It’s much harder to track and control what you’re spending when it only requires a “swipe.” We already know that people spend more easily when using abstract means of payment – like credit cards, checks, or electronic payments – as compared with actual dollar bills.
The Takeaway: Basic skills like tracking spending, balancing a budget, or reconciling bank accounts should not go out of style, even with newer financial technology. Make sure your kids understand the fundamentals of personal financial management and build good habits that can create financial independence and self-sufficiency. That’s a valuable legacy for any parent to pass on to their kids.