Youth spend tomorrow's money on today's frivolity

People inside a shopping mall in Ho Chi Minh City, Vietnam, on April 26, 2020. Photo by Reuters

"None of the six people I contacted lent me the money," the 26-year-old recalls. When he eventually got a nod from a close friend of his, he was so touched he burst into tears.

A vocational training school graduate, Quy is working for a monthly salary of VND15 million, higher than the average income in Vietnam, which stood at VND7 million after Q1 2023, according to the General Statistics Office of Vietnam. Still, he has no savings.

"I get my salary transferred to my bank account at the beginning of every month," he says. "I always end up having spent all of it before the middle of the month hits."

He is not an outlier in Vietnamese society.

Ngo Thanh Huan, chief operating officer of the personal financial advisory service FIDT, claims that current generations are spending more generously than their older counterparts, a trend caused by financial and educational reasons.

Around 10% of the respondents who participated in a survey by VnExpress answered "Yes" to the question "Have you ever had to deposit your properties to ask for a loan, or borrow money from your relatives and friends, as a result of having no savings?"

This lack of financial management often leads to panic in cases of unexpected events. 67% of the Vietnamese participants in Backbase’s 2021 "State of Banking and Financial Wellness" reported that they had suffered from financial pressure. In addition to that, the proportion of people in Vietnam admitting not being able to manage their own financial resources was also highest among the report’s 10 surveyed countries.

The 29-year-old Hanoian Van Linh, who is working for a monthly salary of VND30 million, says he does not have any savings after seven years working. Nor is his monthly salary enough to cover his living expenses.

He estimates that he spends around VND10 million on drinking with friends every month, another amount of between VND15 million and VND20 million on online shopping, and from VND6 million to VND7 million on online games.

These already exceed his monthly salary, even without considering what he pays in rent for housing.

"You only live once, so I don’t want to sacrifice anything," he explains. "I used to save before, but after moving out, I don't do that anymore. I just spend all of the money I earn."

Linh often runs out of money before reaching the next payday. He has turned to credit cards to cover his living costs.

"I think we should teach students what to do with money and how they should prepare for the long-term financial picture," Huan says. "Instead of vaguely threatening them that their lives will be gloomy if they spend too much money."

He also suggests that educational institutions should teach their students about sustainable investing, so that the students avoid falling into the traps of get-rich-quick schemes.

Huan also points out a fact that families' financial conditions and the number of children there are in each family are now "inversely correlated." This means that more money can be spent on less children. So, the youth are growing up with more generous spending going on around them, a behavior they eventually emulate.

"Current generations also have more things to spend money on compared to people in the past, from shopping to hanging out with friends, traveling, and dating," he adds. "Not to mention that the convenience and development of e-commerce platforms adds to the temptation."

When asked what he spends his money on, Quy says he collects shoes as his hobby.

"When I look around and see all of my friends and acquaintances are buying, I can’t help feeling like I want to shop as well," he explains. "So I’m always in the mood to look for shoes to buy."

He also admits that there are shoes, some of which cost him around VND6.8 million a pair, that he has only worn once or twice since buying. He also owns several pairs of the same design as well. Still, he cannot control his urge to purchase even more, which he attributes to the fact that he did not have them when he was a child so now he does not want to miss the chances to possess them again.

His shoe collecting hobby is not the only face of life costing him financially.

"Whenever I feel like eating out, I eat out," Quy adds. "I can hang out with my friends at coffee shops three to four times a day, and then have dinner with them at luxurious restaurants. As long as I work, I will get paid and have money anyway."

This attitude towards money may lead to several consequences, according to Huan.

Firstly, young people may exchange their chances to save and invest for their future for things they do not need. Many start investing later in their lives as a consequence of the overspending of their youth, and thus have less time to earn profits, Huan observes.

Secondly, Huan warns about the potential burnout cycle that many people may suffer when they spend too much money: they have to work harder to check out things in their shopping carts, which leads to mental struggles, which in turn motivates them to shop more, and so on.

In addition to that, the more time they spend working, the less time they have for their families, their social connections, and themselves - which contributes to pushing them to burnout.

"I have seen a study in which 65% of the participants aged between 30 and 35 said they regret a purchase of an expensive item they had made in the previous 12 months," Huan adds. "And 50% of these people explained that they bought that thing only to realize that they did not need it and it was a waste of money."

With this being the case, overspending does not really guarantee happiness. But it does guarantee pressure when emergency expenses can’t be afforded.

Quy is now on his way to change his spending habit. He says he felt deep regret when he could not even cover his own needs merely because he spent his money on things he did not really need.

Meanwhile, Linh is still confident with his lifestyle.

"I don't borrow money from anyone but the bank," he says. "I have to extract only VND800,000 to VND900,000 from my monthly income to pay [my credit card bills to] them, and that’s nothing."

"So I will just spend my money."