Millennials tend to overspend when using mobile banking

By Yimian Wu

While mobile banking engages the Millennial generation, those Americans born between 1982 and 2000, it may also lead to overspending due to online shopping and easy access to credit, said financial experts and government officials in Chicago Wednesday.

They spoke at a financial literacy summit organized by the Federal Reserve Bank of Chicago and Visa Inc. at the Chicago bank in the Loop.

“It is not only easier to save with mobile banking, but with technology being what it is, it is easier to spend. People don’t have to leave their houses to buy just about anything,” said Secretary of Labor Thomas Perez.

“Financial literacy is about thinking long term,” he added. As a father with three children who constantly ask for his permission to shop online, Secretary Perez said that for Millennials, thinking long-term means day after tomorrow.

He also said the summit “heightens the importance of explaining to people that we have a maple tree in the backyard but not a money tree.”

Steven Ciobo, a member of the Australian parliament and former parliamentary secretary to that country’s Treasurer, said that as young people are increasingly using credit and digital money, there are “lower levels of resistance to what that expenditure actually means.”

He also said that Millennails today have “effectively almost unlimited potential through the use of credit linked to mobile phones,” so they need to be reminded that the money they spend is not “esoteric cash” but money from their wallets.

Amando M. Tetangco, Jr., governor of the Central Bank of the Philippines, said that in his country there is a similar concern. Young Filipinos, he said, are struggling more than their older counterparts when it comes to budgeting and not overspending.

Georgette Jean-Louis, executive board member of the Central Bank of Haiti, said that mobile banking reduces the cost of saving for the largely rural population with only small amounts to save and limited access to financial institutions.

But, she added, in Haiti, where half of its population is under 21, the biggest challenge facing Millennials is economic inequality.

Visa’s Vice President Jason Alderman said, “There is a real disconnect for Millennials. They have access to and comfort with technology that could really empower them. But at the same time, many Millennails are afraid of and ignoring their financing.”

Photo at top: Participants in the panel discussions at the Federal Reserve Bank of Chicago included (from left) Amando M. Tetangco, Jr., governor of the Central Bank of the Philippines; Lucie Tedesco, commissioner of the Financial Consumer Agency of Canada; Steven Ciobo, former parliamentary secretary to the Treasurer of Australia; and Georgette Jean-Louis, executive board member of the Central Bank of Haiti. (Yimian Wu/Medill)