While mobile devices have had a clear impact on consumer spending habits, it’s important not to overlook another effect this technology has had: providing users with easier access to financial services. Fintech has already helped unbanked and underbanked people in Africa take advantage of financial services without relying on traditional institutions.
We should expect similar effects in America. And, given the fact that many American kids and teens have mobile phones, it’s safe to assume that fintech services will introduce American youths to personal finance management at a younger age than in previous generations.
If this does occur, there are a number of potential outcomes. They include the following:
High broker fees have deterred many from investing in the stock market. This is especially true of younger people, who may not have the funds to buy stocks. Apps like Robinhood, which does away with broker fees and simplifies the process of investing, may provide young adults with the ease-of-use they seek.
On the one hand, smart young investors can benefit. The earlier they create a portfolio, the more time it has to grow. On the other hand, investing is risky, and young people with less experience could potentially lose a lot of their money this way. As with so many new mobile services, there are potential pros and cons to investing apps.
Better Money Management
Although young adults have never enjoyed the tedium of creating a budget, those of the current generation are especially likely to reject the process. Thanks to mobile technology and the Internet, they’re accustomed to convenience.
Fortunately, services like Mint.com have made budgeting much easier. Because teens now have access to these types of budgeting options in the palm of their hand (literally), they’re more likely to start managing their personal finances at a young age.
The potential impact shouldn’t be underestimated. For example, many teenagers who are reluctant to attend college cite financial concerns as a major reason for not pursuing higher education. If they’re able to start saving money earlier in life, it’s possible they’ll be more inclined to apply to schools. As adults, they’ll also be more responsible with their money in general, having years of experience creating a budget. Despite fewer young adults of this generation buying houses early in life, thanks to easier budgeting, that trend might not continue.
Numerous fintech services make the financial processes involved in running a business (requesting funds from clients, conducting transactions, paying employees, etc.) far simpler than they once were. An indirect effect of this may be that younger people will feel more comfortable starting their own business.
This is another instance in which some users will benefit while others may not. Starting a successful business is obviously a positive experience for anyone, but making a business successful isn’t easy. Running a company requires investing a lot of time, money, and effort. Young adults could lose money or perform poorly in school if they make significant investments in businesses that ultimately fail. Parents will need to assist them to ensure they avoid such consequences.
If fintech services do attract younger entrepreneurs, the companies they create will need employees. Thus, even the young Americans who don’t leverage fintech to start companies may still be better able to find work that’s relevant to their skill set. Currently, most teenagers get part-time jobs that aren’t necessarily related to what their future careers will be. The Internet, however, has already made it easier for them to find remote part-time jobs that can provide them with useful experience. There’s a good chance that fintech services will amplify that effect. Because their employers can easily pay them remotely, there will be more opportunities to find jobs that help them develop useful skills.
When we discuss underbanked and unbanked populations, we tend to focus on adults. That said, in their own way, teenagers who haven’t yet opened bank accounts or otherwise made use of traditional financial services may also be part of those groups (perhaps not in an official capacity—it’s unlikely any government study would ever consider a 13 year old without an account to be unbanked—but certainly in terms of how they use financial services). Fintech has already changed that, and there’s good reason to believe it will continue to, resulting in greater financial literacy.