Forget car payments or mortgage payments. Young people today are making grocery payments, trash bag payments, and contact lense payments. It's part of the "buy now, pay later" (BNPL) trend that's taking over among Millennials and Gen Z. BNPL apps like Afterpay and Klarna allow users to purchase items and break up the cost into payments, with little or no interest. A recent report found 53% of BNPL users are age 35 or younger, and the categories seeing the largest percentage increase in BNPL use are contact lenses, garbage bags, and first-aid items.
The growth of these BNPL apps among young people should come as no surprise to older people, according to financial planner Richard Rosso. "This just continues the mindset of if I want something now, I can get it---that frankly, we're all afflicted with," he says. "It's fun to blame younger generations, but for Boomers and Gen X---we've taught Gen Z these behaviors."
"Not only that, but look at the federal government," he continues. "I mean, the mentality is everybody is spending, so why not me?"
Indeed, national consumer debt is now at a record high, and our federal government debt reaches a new record high every day. "This is a mindset that we've seen throughout generations," says Rosso. "Baby Boomers used credit cards the same way, and remember things like layaway or Christmas clubs...now, we just have new technology with it."
While these BNPL apps charge little or no interest, they can lead to bad spending habits among young people. "If you have a young son or daughter using these tools, you should be helping them understand the brakes they need to put on when they use these apps," says Rosso. "They might be using multiple apps with different payment plans charging their accounts, so they can be subject to overdrafts."
"So yeah, this spending can get away from you real quick."
Photo: Moment RF