Online shopping: it’s simplified the spending experience, given us access to stores and products without limitations of geography and it’s opened up world-wide opportunities for retailers, no matter whether they’re based in rural Rangitiki or have a brick and mortar store on London’s High Street.
New Zealanders are increasingly going digital when it comes to buying behaviour. In fact, online spending in New Zealand is now worth $4.2 billion annually. Your children are probably a generation who have grown up with the knowledge that whatever they need is only a few clicks and a credit card payment away.
The trouble is, they’re starting to spend money that they don’t yet have.
The ideal of instant gratification
Buy-now-pay-later solutions are appearing as options at online checkouts, providing consumers with an easy way to buy online, without worrying whether they currently have the funds to do so.
Afterpay is one such service with rising popularity. It works in much the same way that lay-by does, except instead of receiving the goods once all payments have been made, you receive them upfront. Fortnightly payments are continued with the merchant until the outstanding amount is paid off, with fees incurred for any late payments.
The benefit for a buyer is obvious – you get what you want immediately, you satisfy that urge to spend and the life you want to be living is only four fortnightly payments away!
The trouble is, services like Afterpay make payment a… well… afterthought.
It’s no wonder retailers are getting on board with it – even carrying the cost of having this option. It removes a barrier to buying, upping the chances that they’ll turn wishful browsers into buyers – that is, buyers who buy more.
Trigger-happy spending
And this is where the danger lies. When Afterpay is an option, it has the potential to take advantage of the impulsive buying behaviours of a generation who are confronted with an overwhelming number of ‘objects of desire’, all within the palm of their hand.
Where pay-later solutions have their most impact, is in partnership with social media marketing. A quick scroll through Instagram exposes consumers to innumerable products for purchase. Sometimes it’s as simple as the tap of an image in order to shop directly from within the squares. Scarily, a desire to keep up can outweigh the reality that you can’t actually afford to do so.
It’s a millemma (yes, that’s a dilemma for millennials)
Brought to you by two savvy digital-native millennials, it’s no secret that Afterpay has its marketing target set on a millennial generation who have little motivation to save as they enter into their working life. House prices are out of reach, purchasing on tick is the norm, and debt is just a part of life. So, YOLO, right?
Research from CoreData showed that shoppers under 30 were the most likely to use a service such as Afterpay. Afterpay themselves have even confirmed that three out of four of nearly 2 million of its users are millennials. The stats get more concerning – nearly 1 in 5 are using Afterpay at least daily, and 1 in 10 are using it several times a week. One in 4 of these users are making late payments, incurring a fee, at least once a month.
Why budgeting education is important
AfterPay is disrupting young earners’ ability to budget and save effectively. Because it doesn’t actually feel like they’re spending money, it’s difficult to keep track of how much is really disappearing out of the bank account – or worse, going on their credit card.
Without money smarts and budgeting education to keep them savings savvy, your kids could be on the brink of debt by design. The importance of savings, setting goals and targets, working within the restraints of a budget and smarter use of credit cards, loans or interest-free purchases are all important discussions to be had to keep your kids focused on a strong financial future.
While the odd indulgence is a deserved luxury when your kids have entered the workforce and earning their own income, some guidance around smart spending will set them up for long-term success. If you think your kids could do with a helping hand to get them on the right path, get in touch, and we’ll be happy to share the inspiration and advice they need to stay on track.
