'Buy Now, Pay Later' Is Sending the TikTok Generation Spiraling Into Debt (sfgate.com) 193
SFGATE reports on the alarming rise of "Buy Now, Pay Later" services that are being heavily marketed by influencers and brands on TikTok and Instagram. "Gen Z, in particular, has fallen in love with the short-term loans, spending 925% more now through point-of-sale services than in January 2020," notes the report.
"But coupling nearly instantaneous loans with an influencer-addled social media culture that prioritizes exorbitant spending and normalizes debt could be further jeopardizing the financial futures of young people through just four easy payments." Here's an excerpt from the report: Financial experts who spoke with SFGATE expressed significant concerns about the way companies are targeting Gen Z consumers. "They are marketing very heavily to an audience that is younger, that might not just have as much experience on how to use credit and what credit implications are or what it means to have multiple loans at one time," Marisabel Torres, the California policy director of the Center for Responsible Lending, told SFGATE.
Few of the services do significant credit checks, which would help determine whether people will be able to repay the loans. And plenty of people are spending more than they can afford: 43% of Gen Z users have missed at least one payment, according to a survey by the polling site Piplsay. Of Gen Z consumers who used a point-of-sale loan for something they needed, 30% missed at least two payments, according to a survey by Credit Karma.
The companies are fully aware that their services encourage people to spend more. In fact, several of them market it as a benefit to stores that want to partner with them. "We do see larger cart sizes, larger purchases, relative to what they would put onto their debit cards and credit cards," Libor Michalek, the president of technology at Affirm, told SFGATE. Still, high-level staffers at Affirm and Afterpay -- both based in San Francisco -- positioned their services as more responsible, less predatory alternatives to credit cards and personal loans in interviews with SFGATE. They also emphasized the accessibility of these services, especially for younger consumers looking to bolster their credit and consumers working to restore their credit scores, despite the fact that many of the services don't report on-time payments to credit agencies. The report concludes by saying regulation is (probably) on its way. California Attorney General Rob Bonta, for example, signaled his support earlier this year for increasing regulations around point-of-sale loans. We're likely to see other states look into it in the coming months and years as well.
"While these services may be a responsible alternative to credit card debt for a good chunk of consumers, it seems increasingly likely that, without regulations, this kind of debt will burden the most financially vulnerable, just as credit cards, payday loans and layaway have in the past," reports SFGATE.
"But coupling nearly instantaneous loans with an influencer-addled social media culture that prioritizes exorbitant spending and normalizes debt could be further jeopardizing the financial futures of young people through just four easy payments." Here's an excerpt from the report: Financial experts who spoke with SFGATE expressed significant concerns about the way companies are targeting Gen Z consumers. "They are marketing very heavily to an audience that is younger, that might not just have as much experience on how to use credit and what credit implications are or what it means to have multiple loans at one time," Marisabel Torres, the California policy director of the Center for Responsible Lending, told SFGATE.
Few of the services do significant credit checks, which would help determine whether people will be able to repay the loans. And plenty of people are spending more than they can afford: 43% of Gen Z users have missed at least one payment, according to a survey by the polling site Piplsay. Of Gen Z consumers who used a point-of-sale loan for something they needed, 30% missed at least two payments, according to a survey by Credit Karma.
The companies are fully aware that their services encourage people to spend more. In fact, several of them market it as a benefit to stores that want to partner with them. "We do see larger cart sizes, larger purchases, relative to what they would put onto their debit cards and credit cards," Libor Michalek, the president of technology at Affirm, told SFGATE. Still, high-level staffers at Affirm and Afterpay -- both based in San Francisco -- positioned their services as more responsible, less predatory alternatives to credit cards and personal loans in interviews with SFGATE. They also emphasized the accessibility of these services, especially for younger consumers looking to bolster their credit and consumers working to restore their credit scores, despite the fact that many of the services don't report on-time payments to credit agencies. The report concludes by saying regulation is (probably) on its way. California Attorney General Rob Bonta, for example, signaled his support earlier this year for increasing regulations around point-of-sale loans. We're likely to see other states look into it in the coming months and years as well.
"While these services may be a responsible alternative to credit card debt for a good chunk of consumers, it seems increasingly likely that, without regulations, this kind of debt will burden the most financially vulnerable, just as credit cards, payday loans and layaway have in the past," reports SFGATE.
My budgeting system (Score:3, Insightful)
Most brick-n-mortar retailers in NYC accept cash, in fact, they're required to. Report them if they don't.
(1) Only use credit card and electronic payments for online purchases or stuff you can't easily pay with cash.
(2) Take a known amount of money out of an ATM weekly.
(3) Don't micromanage, don't record, don't plan, just have a visual indicator of the stack of cash getting smaller.
(4) Save anything that's left over for fun or take out less next week, leaving more in the bank (or to invest) until the next paycheck.
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You're conflating people taking cash to avoid sales tax with abortion rights?!?!? You're nuts. No matter which side of any issue you fall on, you're nuts.
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Be prepared to be mugged and not have money for the week. I know that a cash based economy is very useful. I know that most people do not have the abstract skill to budget money they never see. But carrying cash today and flashing it around is simply inviting trouble.
Nobody said "flash it around", and the amount of people who still believe in the religion of cash, is minuscule. But it's still wise advice, not due to any small risk of carrying it around, but because young people obviously can't budget worth a shit.
Mugging, is a 20th Century problem that expired when people were rich enough to have cash on them.
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Next time you're in public waiting in line to pay for something, take a good look.
You'll notice that all the addicts around you have their faces buried in their electronic "wallet". No one gives a shit about you "flashing" a couple twenties, because no one is even paying attention to you.
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Law abiding citizens yes, the thought of robbing you doesn't occur to them so they concentrate on their own activities and don't pay any attention to you.
Criminals on the other hand will absolutely be watching for people carrying things of value, and cash is usually at the very top of their list because it's immediately useful to them. Stealing cash doesn't carry the risks (ie tracking) of stealing electronic devices, or the risk that the device you stole will be bricked, or the inconvenience of having to f
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Jeez, what paranoic world do you live in?
Even if it's true: How many times in your life do you expect to be mugged? Three? Four?
Take the Penn and Teller approach if it happens: Smile, hand it over, get on with your life. It's much cheaper and easier then the alternatives.
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Plus: They're just as likely to be interested in jewellery/watches/sneakers.
You'd better not be wearing anything flashy when you go shopping.
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Depends how often you visit high crime locations, wether you have target items on display (yes i agree about jewellery) and wether you fit the profile of a likely mark for the criminals.
We can and should always take reasonable precautions to avoid being mugged or pickpocketted etc.
Re:My budgeting system (Score:5, Insightful)
I paid with cash today. No one mugged me. I don't carry enough that it's worth mugging someone. But a phone, people will get mugged for carrying a phone around too you know, it's worth vastly more than the cash in my pocket. And before the person who's mugged can report the crime, the mugger has gone off and gotten a lot more stuff with that contactless payment than I carry in my pocket. Or they mug you and get the credit card.
Worry about a tiny bit of cash causing you to be mugged is like thinking that you need a giant Humvee to commute with otherwise you will die in the first fender bender.
Re: My budgeting system (Score:2)
Cash stolen is not easily insurable, though. Wells Fargo provides cell phone insurance for paying my monthly cell bill with them - the only item I use their card for. They have paid us thousands over the years in claims for phones damaged or stolen, at $600 a pop, most recently this Wednesday for water damage on a Note 20 Ultra .
Contactless payments require you to unlock the phone. This assumes the mugger threatened you to unlock it.
In other words, same threat model as if they steal your ATM card, which eve
Re: My budgeting system (Score:2)
Fortunately, he had no cash. Pants were of negligible value. The biggest monetary loss we suffered was the cost of changing car/house locks, as his keys were in the pants, and stolen as well ... sigh.
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A modern phone may well be expensive, but they're also lockable and trackable.
A stolen phone that gets reported will be blocked by the manufacturer and blocked from all mobile networks, rendering it useless as a phone. Its value as a collection of phone parts is significantly less.
A stolen phone can also potentially be tracked, which could result in the police or your angry victims turning up.
Contactless payments on phones generally require the phone to be unlocked, so you won't be making those with a stole
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Carrying a small amount of cash is not practical unless you also carry cards. Sometimes you need to make larger purchases, and sometimes larger purchases happen unexpectedly. With a card you're prepared for such circumstances.
It's possible to carry a card as well as cash.
Really it is. They're not exclusive.
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Hence the last line of my post which explicitly called this out:
"Carrying a small amount of cash is not practical unless you also carry cards."
Most people who use cards also carry a small amount of cash incase of situations where cards are not accepted - typically very small purchases. But if you're carrying both then in the vast majority of cases it's simply easier to use the card so it still boils down to being responsible managing your cards.
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the mugger has gone off and gotten a lot more stuff with that contactless payment
Good for the mugger and literally no skin off my bones for me. Well I guess filling out a stat-dec online and reporting it to the police is skin off my bones, but I would end up with literally no less money in my bank at the end of the process.
Anyway you're presenting a false equivalency. You can't go around your life carrying only a few dollars cash. At some point you'll need to carry more and when you go back to from getting your major car service the cash you carry is probably worth far more than your ph
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Jokes on anyone who tries to steal a Jaguar. Expect to find your car a few blocks down the road, broken down and in need of another trip to the garage.
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If I'm carrying a lot of cash I split it up and put it in different pockets. That way I only pull out a small amount at a time.
If I did get mugged (hasn't happened yet) I'd just give them the small one.
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Be prepared to be mugged and not have money for the week.
There was just a story on the news about someone getting their phone stolen, threatened to get the unlock PIN and then killed. I imagine something similar would work for ATM cards.
You can't freeze your bank account, iPay or credit cards if you are dead.
Re:My budgeting system (Score:4, Funny)
It might be better to learn that abstract skill. Besides helping the person out enormously, it also tends to qualify you for a lot of jobs that involve budgeting and look dimly on insisting on stacks of cash sitting on your desk so you can "visualize the expenditures."
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He must be so accustomed to the police taking him to the lockup every time they stop him that he's used to losing personal possessions in the evidence locker. Which can (and often does) happen if you actually get booked.
But if they just stop n' search then no they're not going to confiscate cash. Unless you're in like . . . Puerto Rico. Maybe.
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You really think it works that way?
The shift commander is going to laugh in your face. He doesn't care about spending money on lawyers.
They will start by saying that you don't have standing. They money is accused of being the proceeds of drug sales, or whatever. Not you: the money.
You will spend far more on lawyers than you could hope to recover. The money is gone.
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Yes that’s right! You should definitely avoid it avoiderman.
Hahaha oh wow. (Score:2)
Dude there’s places they’d think that was hilarious. You could hand them your attorneys business card and they’ll laugh and give you an extra beating for being sassy,
Wherever you are. It’s a good place and you should definitely not stray off highway down south.
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Of course they're going to take the phone if it's easily available to them during a crime, but the criminals would much rather get cash.
Cash can be used immediately, a phone needs to be sold to someone, and stolen goods are worth a lot less than genuine purchased goods because of the risk involved as well as the extra effort required to circumvent technological measures.
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In high school we had to watch the movie about how not to buy everything now on credit, with the hapless young couple having everything repossessed later. Maybe they don't teach finances in school anymore...
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I totally disagree with using cash for all your regular purchases. I stopped taking out a weekly cash amount from an ATM during the first Covid lockdown. At this time, almost all retailers in my area started accepting debit card payments. I presume this was partly for reasons of hygiene. This included stallholders at the monthly farmer's market. There is now only one retailer in my area that insists on cash, which is the Chinese takeaway. At one time, small retailers did not like card payment for small amou
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There's nothing wrong with using credit cards, so long as you're sufficiently responsible to use them properly.
The problem is not the credit, it's the irresponsible use of it.
For many payments cash is impractical (eg distance payments), inconvenient (eg dealing with change or having to find an ATM because you're not carrying enough for something unexpected), or invites risk (eg theft, receiving fake bills, damaged bills, lack of comeback if what you bought didnt perform as advertised etc), not to mention th
Everything is pushing you to debt now (Score:5, Insightful)
Debt is a valuable tool, and I wouldn't resist using it entirely.
But just be aware the entire financial world is designed to ensnare you in debt of one form or another. Credit cards, mortgage, cars, payment plan for vacations, and generally as the summary mentored "pay later" programs...
Just be aware of whatever debt you are building up and have a wild plan to pay it off as quickly as possible... it's lots harder but if you can save up for things or pay up-front, it's a lot easier on you down the line and you are feeding the banking system less money.
Re:Everything is pushing you to debt now (Score:5, Informative)
In the US it's even worse. To be eligible for something like a mortgage, you don't just need to have a reliable job and income, nope.
You need to have been in debt. Constantly. In multiple different ways.
Because that 'builds your credit score', and that's the almighty proof that you pay off your debt.
Not ever having had any debt at all, and proving you can actually manage your money apparently isn't important.
It's such an ass backwards system that the first time I encountered it I didn't even believe it...
Re:Everything is pushing you to debt now (Score:4, Informative)
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It's not really all that ass-backwards when you consider those who are lending money, would prefer to loan what is likely to be anyone's biggest loan ever and can span upwards of three decades, go figure they would like to have someone with experience in managing a credit line.
How many people with zero experience would you hire for such a trust?
For the record, I agree with you. Hate holding debt personally, and don't agree with the scoring system. Just offering the other perspective.
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No, that is the reason they charge 20%+ for those loans. They are still worth the gamble, more often than not.
And we both know that if they suddenly stopped giving out those loans, the first word out of the medias mouth, would be racist.
Good point (Score:2)
You need to have been in debt. Constantly. In multiple different ways.
That's a really good point, that access to a lot of things in the U.S. does require a record of exercised debt. Yes you can use it just a little bit and responsibly, but it just another way to lure you into an addictive pattern early.
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> That's a really good point, that access to a lot of things in the U.S. does require a record of exercised debt.
You're not wrong, and I think it's worth clarifying.
"A lot of things" is two - a house and a cat that's more expensive than the one you can save up cash for.
Also, "requires" is "it's easier that way".
As long as you're going to make a car payment every month, you CAN make that payment into your savings account, like I did. That does mean driving the "junky" car a year longer than your friends.
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Re:Everything is pushing you to debt now (Score:4, Interesting)
Would you feel better about lending a book or a tool to someone you know who's borrowed things many times and returned them promptly and undamaged, or a random stranger who wandered by?
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If you can see the stranger owns a nicely organized workshop or home library, then sure. Why not?
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Could be a nicely organized home library of books they stole or borrowed and didn't return.
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or a random stranger who wandered by?
False equivalency. In the USA you lend based on a credit score, that doesn't mean elsewhere they lend to just anyone. Having just gone through the process of a mortgage in Europe you'll find that it is actually far more involving than giving money to a "random stranger who wandered by".
By the end of the process the bank knew more about us than close family does.
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You can get the mortage without tons of credit card usage in the past, but you do need a higher down payment to start with. Heck before the slice and dice mortgage backed security meltdowns, they'd give mortgages to people who obviously could not pay. And today, everyone gets a credit card almost automatically and is pre-approved.
They're not interested in you paying off debt (Score:5, Insightful)
Re: Everything is pushing you to debt now (Score:2)
Wasn't true for me. I bought my first house in the mid 1990s with a mortgage. I had never had debt before. I could not get approved for a credit card before I had the mortgage. The mortgage was my first credit account. I did have to sit with a loan officer in person to get approved. She sifted through all my pay stubs and bill statements from my first year of employment in the US, which I had dutifully scanned.
Once i bought the house, i went shopping for furniture. I still could not qualify for a store cr
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You don't need to have a history of debt, you just need to have a verifiable history...
The bank wants to know how much you earn and how much you spend, so they can determine of the mortgage is affordable for you. If you spend on card, then they know what you're spending on. If you always use cash, then the bank has no idea what you use that cash for which creates uncertainty and thus higher risk.
I know many people who have never been in debt apart from a mortgage, and they had no trouble getting approved.
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It's such an ass backwards system that the first time I encountered it I didn't even believe it...
It's even worse than you imagine and not unique to the USA. In Australia I needed a credit check for my mortgage and it came back with "unpaid bills". That's a load of bullshit since I've never missed a bill payment in my life. Turns out I had an unpaid bill from my mobile phone company, from back when I got a new phone with "first month free" package. I remember getting a bill for $0 and a reminder to pay that bill within 30 days.
That went against my credit score. I didn't pay a $0 bill.
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There's ways to properly manage debt.
Having a credit card is the easiest way to build your credit rating, and you don't have to do anything more than put something on it and pay it off every month.
It's not hard. Get a no-fee low limit credit card - your bank probably has a dozen options to choose from, then perhaps put a subscription on it - a streaming service or other thing you have that recurs monthly. Then just pay it off every month.
It's not hard to be responsible with credit.
And debt is only good if i
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In the US it's even worse. To be eligible for something like a mortgage, you don't just need to have a reliable job and income, nope.
You need to have been in debt. Constantly. In multiple different ways.
Because that 'builds your credit score', and that's the almighty proof that you pay off your debt.
Not ever having had any debt at all, and proving you can actually manage your money apparently isn't important.
It's such an ass backwards system that the first time I encountered it I didn't even believe it...
Yes, and no. That's a bit exaggerated.
For about 10 years after a medically induced financial disaster, I wouldn't touch debt with a 10 foot pole. Any kind of debt.
Then the time came when we were ready and wanted to buy a house. And as you say - needed to have some kind of credit history.
We literally just got a secured credit card - from the same bank we would eventually get the mortgage from - bought gas with it, and paid it off in full every month. It took like three months.
That was it. Never any inter
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It took like three months.
Otherwise known as a time window that would miss the opportunity to secure financing for the house you wanted to buy. That's no minor thing especially if the housing market is crazy.
Even more funny is that "secured credit card". The idea that you need to put an upfront payment to borrow back money is hilarious. The system is fundamentally broken as someone without a credit history can't get a credit card without a security, while someone who actively has a horrible credit history and is hugely in debt can e
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If you know how the credit score works you can get your credit score up without running up a bunch of debt or wasting money on interest. If people had any idea how their credit was really rated they’d have to come up with a new system
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Paying down debt as quickly as possible (or staying out of it in the first place) is usually the best practice.
However, if you have debt with interest rates that are under 4%, you can actually wind up ahead if you drag that out. Instead of paying it down, put the money you would pay into a nice mutual fund that pays a steady 5%. There are bond-heavy funds that do this, and they pay out 1/12 of 5% every month. Rich people use this strategy all the time: even though they could afford to pay cash for a hous
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Debt is a valuable tool, and I wouldn't resist using it entirely.
What I learned, the hard way, is that debt magnifies a disaster such as losing your job. I juggled a number of creditors while living on benefits. You can usually do a deal to pay off a nominal amount every month, but even then, you have to find the small payments from somewhere. My usual peasant style vegetarian cooking got really inventive at this time.
But just be aware the entire financial world is designed to ensnare you in debt of one form or another.
As far as I understand the banking business model, they make money from lending. Money on deposit from customers is a liability on the bank's accounts, whe
Re: Everything is pushing you to debt now (Score:2)
Wow, PredatoryCredit It Didn't Exist before TikTok (Score:5, Insightful)
Poor financial decisions have plagued every generation since the beginning of civilization. Credit Cards have been around for decades and have been responsible for much the same issues as mentioned in the article. What else is new?
Oh, it mentions TikTok and Influencers.
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Mentioning TikTok is just clickbait.
These "No/Low money down, just pay X 'EZ' payments of $49.95" high-interest debt scams have been around longer than most baby boomers have been alive. They predate the Internet and even Television.
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All I read out of this story is that it is literally a non-story -- every one of us predating this generation has had to find our own way to survive and thrive, and it's never been easy or automatic. If the tiktok generation is somehow startled and appalled by the world they see, I fully blame their parents for failing to appropriately prepare their offspring to survive within the real world.
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Re: Wow, PredatoryCredit It Didn't Exist before Ti (Score:2)
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Things have changed. Education used to be free or low cost, now it requires students to take out massive loans. Homes used to be affordable in relation to average income, now they are huge debts that young people struggle to take on. Cars used to be fairly affordable, now the manufacturers prefer to sell them on finance.
Young people are told by their parents and their teachers that taking on debt is the way to succeed in life. Get that education, get on the property ladder. Once that is normalized it's then
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The loan sharks existed before. What's different now is that people that you think of as friends are working for the loan sharks to drive you to them.
It's like some weird extrapolation of multi-level-marketing insurance scams. Only that the people suckered into selling their friends the insurances aren't victims themselves.
The Loan Shark Lives! (Score:5, Informative)
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Finance everything! (Score:3)
You know things are fucked up when you go to order a pizza and financing is an option.
"Pay over 6 weeks!"
A fool and his money... (Score:2)
... are soon parted.
We live in a consumer society that celebrates... consuming! And so this shit gains traction, like payday loans and usurious credit card interest, etc.
But that's the new American way - the omnipresent hustling and scamming, and the dream of something for nothing. What a combination!
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Consuming is the ONLY thing that keeps our economy running. If people stop consuming, the economy is shot.
The key problem we have now, though, is that people don't have any money left to consume. And without it, the economy circles the drain, too.
Owe my soul to the company store (Score:2)
It is not the credit that is the issue. It is no
Parents? (Score:3, Informative)
Where are the parents? I know I've taught my daughter enough about finances that this kind of scheme would fail with her. Why didn't these kids learn that from their parents?
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These are the kids who didn't get to enjoy the privilege of being aborted. They are on their own without parents or ones who are utter dumbshits.
It's not pleasant but that's the truth.
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How elderly are you?
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Yup, parents kept bitching that schools were teaching too much useless stuff, so now it's just Reading, 'Riting, and 'Rithmetic. Though sometimes the arithmetic is optional ("ain' no one used numbers since joonyur high round here!"').
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I don't have any kids, but one thing is for sure, young people will ignore the advice of old fogies, and have whatever fun is on offer. It would be a sad thing to go straight from childhood to middle aged. One lesson from this is for older people, who theoretically have learned their financial lessons, to use their money wisely, which means at least some of it spent on having fun. Financial lessons are more credible if you can see some benefits.
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I don't have any kids,
Ya, it's obvious.
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What was your point, then?
Re:Parents? (Score:4, Insightful)
A great deal of "WTF" is easily understood when you realize that intelligence is on a bell curve and 1 in 7 people are "borderline intellectual functioning" or worse. 1 in 7.
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Their parents probably told them that taking out a massive student loan, followed by a massive mortgage loan, was the best course of action. It worked for their parents, or was something their parents aspired to.
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Parents are busy working 3 jobs to make ends meet.
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Where are the parents?
Hopefully minding their own business. The "TikTok" generation is another term for GenZ who are the largest TikTok users and who are now all adults.
Why didn't these kids learn that from their parents?
Probably because TFA is stupid and doesn't realise that Buy Now Pay Later, no interest for X months, and similar schemes have been around and financially destroying the lives of every generation back to the boomers.
Spending what you don't have (Score:2)
Debt gives you financial leverage. It gives you options. It does not, however, create money out of thin air. If you don't have it, you can't spend it.
A lot of stuff I've bought lately has offered me payment options. If I don't pay it on the spot I use one of my credit cards. Does this make me old-fashioned?
...laura
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Buying stuff on finance deals is often just throwing money away. Credit cards are all very well, but only if you pay off the balance every month. Since having to service a long term credit card debt after losing my job, I am very wary of this form of borrowing.
The concept of financial leverage only works if you borrow money in order to invest it, the idea being that the profits from the investment exceed the costs of servicing the debt. For most consumers, this only applies to buying property on a mortgage.
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Debt gives you financial leverage. It gives you options. It does not, however, create money out of thin air. If you don't have it, you can't spend it.
Someone forgot to tell the federal government.
The reverse also (Score:3)
does not matter if you think... (Score:3)
Obama was as pure in motives as the windborne snow, or as twisted and evil as a NAZI doctor, so just set that aside and do not reflexively mark this "troll" while I make a point: I believe that the government takeover of the student loan business during Obama's term put this pre-existing human condition on steroids. Suddenly, the US Government started telling young people to pay no attention to what college cost and to borrow without regard to the long-term impact on their lives in order to get an education NOW that would OBVIOUSLY pay off over the long term. This was the biggest "buy now at insanely inflated prices, and pay later with an unknown possible future income" message in human history. The easier the feds made it to borrow, the higher the colleges raised their rates, and young students, uninformed by enough personal life experience, bought into it all and took out those loans. Now, with many graduates constantly demanding student loan forgiveness, and half the politicians teasing that they might grant it, younger Americans are getting the further-warped idea that huge debts voluntarily taken-on will possibly not need to be repaid, particularly if those debts are massive enough.
Again, this is NOT about Obama; he is invoked here because the action was on his watch. It simply cannot be a good thing for government to setup such an inverted message re financial wisdom.
Since the dawn of civilisation (Score:2)
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Re:Fuck this story, fuck this story so much (Score:4, Insightful)
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It's properly spelled "influenza".
It's a disease.