Between taking on way too much student debt, doing sensitive banking on smart phones, and forgoing home ownership, it may seem like all of us are ignoring the money lessons our parents and grandparents tried to teach us.
Being careful with money is looking more and more like a skill from a previous century.
But the real issue isn’t loss of money skills. It’s the fact that the financial world has seriously changed in the past few years—and how it will continue to change. Millennials (and the generations that come after them) are dealing with new and difficult financial problems that never would have occurred to earlier generations.
Here are three common financial problems that will make a huge difference in Millennials’ finances—that didn’t exist just a couple of decades ago:
1. Data mining
Privacy as a concept is changing in the new Millennium. It’s now perfectly acceptable (and even expected) to share every facet of your life online, which often leaves older generations scratching their heads.
But our changing expectations of privacy are not just about embarrassing photos and the confessional nature of blogging. The fact that we live much of our lives online means that companies now have incredible insights into our spending habits. And that means that we are much more vulnerable to marketing, since it can be tailored to us.
For instance, you may have noticed that whenever you do a search for a product that you do not buy, that product will then show up on completely unrelated sites’ advertising. That’s because Google is selling your search information to advertisers.
This gets even more worrisome when you consider just how specific the targeting is. According to Consumer Watchdog, this kind of data mining allows advertisers to pinpoint “pain points”—the maximum prices that consumers are willing to pay. Since marketers recognize that pain points are different for different people, data mining allows them to sell the same product at varying prices.
Of course, marketers have always attempted to find these pain points. But data mining—which allows marketers to know whether you frequent savings websites or make reservations at high-end restaurants—can pinpoint your pain point much more accurately.
While it’s unlikely that you stay up nights worrying about what is being marketed to you, it’s likely you will see a difference in your finances because of this targeting.
And of course, data mining will only become more sophisticated and more accurate, meaning marketing will be more and more difficult to resist.
2. Ease of purchase
Of course, the influence of marketing would not be nearly as big an issue if people still paid for goods and services the way they used to: with cash or checks in a physical store.
Nowadays, even very frugal individuals tend to have their credit card information saved on various websites, making it ridiculously easy to spend money without feeling it. And considering the fact that you can make in-app and in-game purchases on your phone without even pausing your game-play means that spending money can be done almost entirely without thought.
If you are not spending your money mindfully, 99 cents here and $5.99 there can add up to big financial worries.
3. Grey charges
Grey charges are little charges on your credit card or cell phone bill that you haven’t necessarily agreed to and don’t know about. They come in several flavors, but there are three that you will see most commonly:
- Free-to-paid charges—These occur when you sign up for a free trial that requires you to enter your credit card, and then forget about it. Once the trial period ends, your credit card is charged.
- Phantom charges—These charges occur when you are charged for a product or service (like a ring tone or a reoccurring credit protection service) that you didn’t know you were signing up for and didn’t agree to buy.
- Zombie charges—Like the name implies, these are charges that will not die even after you have tried to cancel them. For instance, you might not realize for a few months that your gym membership is still being debited from your account after you finally quit the gym.
Grey charges are especially pernicious because many times you have agreed to them in the terms of service (that you didn’t read) and you don’t realize you’ve paid them until you several months have gone by—at which point you might decide that it’s not worth the fight to reverse them.
And at a staggering cost of $14 billion per year, paying for things you don’t know about, don’t want, and don’t use is a major financial headache for the new millennium.
The Bottom Line
The technology that is the backbone of our modern society is also changing the financial playing field. In the new millennium, we are all going to have to be savvier, more mindful, and more attentive to our money than our parents and grandparents were—just to keep up.