I was reading a financial report on a new type of app that provides instant loans to consumers so they can buy products online. Unlike traditional borrowing, this new financing comes without any interest charges, so the borrowers feel like they are getting a pretty good deal. The fees are charged to the retailers who of course pass on the costs to the consumers in higher prices. So as always, nothing is free. What concerns me about these new lenders is that they largely target younger people, who are flocking to them by the millions. I find it worrisome that these companies are essentially addicting young people to easy and cheap debt. Like any other addiction, the long-term effects could be disastrous.
My grandparents grew up during the great depression. They understood firsthand what real suffering and poverty looked like. They saw the sorrow that came from living beyond ones means as they watched many of their friends lose everything when the good times turned bad. We all know about the great depression but sometimes forget that it was immediately preceded by the “Roaring 20’s,” a time of great prosperity that many thought would never end. Having lived through it, and seen the pain it caused, my grandparents wanted nothing to do with debt. They borrowed money to buy their home, then made extra payments as much as they could and got it paid off quickly.
They would not have been considered unusually wealthy but living largely debt free made them well-off enough that the family never lacked for anything that was important to them. I learned from them and tried to follow a similar pattern. There are things in life that most people need to borrow for such as buying a home, a dependable car, a good education and starting a business. All of these add value to your life and help you to build additional wealth. Borrowing money to buy things you don’t need, or that do not contribute to your wealth, is almost always a bad idea.
When I was young, large corporations tried to addict my generation to cigarettes so they would have a lifetime of customers. In modern times the Vaping companies also went after young people. Now it appears it is some lenders who are trying to addict young Americans to debt, an addiction that has ruined countless lives. I assure you it is not because they care about their new young customers.
I hope the rising generations will recognize they can live prosperous lives if they manage their financial resources well and avoid unnecessary debt. I hope they will reject these new lenders who want to addict them to debt while they are young, so they can profit from them throughout their lives. And I hope there are enough grandparents still around who will take the time to teach their grandkids about being wise with money because the world these young people live in is certainly not going to do it.