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How kids are adapting to a cashless culture

A quarter of the U.S. population is made up of people born from the mid-1990s to around 2010, known as Generation Z. When it comes to making purchases, this group is accustomed to buying online and using credit cards, but less familiar with cash. How does the absence of tangible currency, and the constant exposure to digital advertising, affect their relationship with money? Paul Solman reports.

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  • Amna Nawaz:

    Generation Z, people born from the mid-1990s to around 2010, make up a quarter of the U.S. population, and they're growing up in an increasingly cashless society. How does that affect their relationship to money and finance?

    Economics correspondent Paul Solman took a group of kids on a field trip to find out.

    It's part of our weekly series Making Sense.

  • Paul Solman:

    So, anybody want some ice cream? All right, it's right over here.

    A chilly day in Manhattan, but for 10- and 11-year-olds, there are no unseasonable treats.

    But the excitement for the grownups, myself and personal finance expert Beth Kobliner, this was a transaction with an unfamiliar twist. This store doesn't take cash, ever. Like a growing number of retail shops, it's plastic or mobile payment only.

    But cashless was no problem for the kids, who, of course, weren't paying.

    What are you going with?

  • Student:

    Cookies and cream.

  • Paul Solman:

    Cookies and cream.

  • Student:

    With a sugar cone.

  • Beth Kobliner:

    Sugar cone.

  • Paul Solman:

    But they're also growing up at a time when only one in three purchases is made with cash. So, we wanted to know, does an increasingly cashless economy keep kids from grasping the basics of price and value?

    How much do you think these things cost?

  • Student:

    It tastes so good, I think it would be like anywhere from $3 to $7.

  • Paul Solman:

    But the kids say expensive compared to the ice cream truck.

  • Student:

    They only charge you $2.75.

  • Paul Solman:

    OK, so they're familiar with relative prices. But can they calibrate value?

    If I said to you, I will give you $5.50, instead of the ice cream cone, which would you choose, the cone or the money?

  • Student:

    The money.

  • Paul Solman:

    You would? Why?

  • Student:

    Because I could get something else, and I could maybe get a cheaper ice cream.

  • Student:

    You can get the same amount, a bigger amount of ice cream, for $2.75 at Trader Joe's, or $3.99 at Trader Joe's, and then you can have ice cream for a whole week.

  • Paul Solman:

    All right, I know what I'm going to do. I will offer $2. Who will still give me their ice cream for $2? What about a dollar? A dollar.

    But, in the end, two of the kids actually took my lowball $1 cash offer for half-eaten ice cream, whose allure was apparently melting as fast as the foodstuff itself.

    This suggested not only the economic concept of diminishing returns, but also that hard currency has the same cachet, or more, than it did when Beth Kobliner and I were first lured into the sugar market.

  • Beth Kobliner:

    When I was little kid, about 10 or 11…

  • Paul Solman:

    Yes.

  • Beth Kobliner:

    … I remember going to the ice cream store, and my dad would give me a dollar. And ice cream then was 50 cents, and the sprinkles were 5 cents.

  • Paul Solman:

    In my day, a quarter, by the way. An ice cream cone was a quarter.

    (LAUGHTER)

  • Beth Kobliner:

    And I would get change. And the whole transaction was really about learning addition, subtraction, numeracy. Today, 70 percent of all our purchases are done online or with cards.

  • Paul Solman:

    How many of you have smartphones? Every one of you.

    Now about half of 10-to-12-year-olds have smartphones, and 40 percent of teenagers have debit cards. So, is cash arithmetic a lost art?

    How many quarters in $3?

  • Student:

    Twelve.

  • Student:

    Twelve.

  • Paul Solman:

    How many quarters in $3.75?

  • Student:

    Fifteen.

  • Paul Solman:

    Fifteen. Very good.

    So, kids can still count without burning much cash. But aren't they being suckered into spending by switching to a credit card?

  • Isaac Smith Lewis:

    I don't think I would be responsible with one, because I would just want to go around spending, spending it. And then all your money is wasted on stupid stuff sometimes.

  • Paul Solman:

    Isaac Smith Lewis' reluctance was echoed by the others.

  • Alice Richelson:

    I'm going to be going on, like, shopping sprees and be, like, OK, everything is on me.

  • Dawood Alselmi:

    I can't use credit cards, because then I will be, like, ooh, I will buy that, I'm going to buy that, I'm going to buy that.

  • Akeelah Stroy:

    Money doesn't grow off of trees.

  • Paul Solman:

    When it comes to credit cards, in fact, Gen Zers may be more penny-wise than their parents.

    Dawood's mom, Huda Qatabi, for example.

  • Huda Qatabi:

    Credit cards, especially me, I just swipe, swipe, swipe. And then, at the end of the week, it's like $500, $600, and I don't know what I did with it.

    Personally…

  • Paul Solman:

    Really? So, you're as bad as they are?

  • Huda Qatabi:

    I'm worse.

    (LAUGHTER)

  • Paul Solman:

    Worse?

    So, are these Gen Zers safe with their or their parents' money? No. Take it one further removed, and to tech savvy marketers, they're sitting ducks. That's because kids this age spend about six hours a day online, on average, much of it playing video games, and spending on them.

    The industry's new business model, selling items within the game, like the outfits the characters wear, also known as skins, in the game sensation "Fortnite."

  • Alice Richelson:

    In-game purchases, I feel like it's just like, click, click. It's just not real money.

  • Isaac Smith Lewis:

    Inside the game, it's just feels like you're just using, like, game money.

  • Paul Solman:

    These kids aren't alone. Facebook came under scrutiny earlier this year when documents revealed it made than $34 million from in-app purchases made by minors.

    And, as Alice Richelson told us, these aren't always one-time charges.

  • Alice Richelson:

    I got a subscription on a coloring app, and it just kept taking money from every month, and, finally, my dad found out, and I got in trouble.

  • Jason Richelson:

    Yes. She somehow signed up on iTunes for a bunch of — some games that kept charging over — every month. And I didn't get the receipts. It went to her e-mail. But I changed that now. And so I didn't know that was happening. So, I shut that off, yes.

  • Paul Solman:

    But when it comes to other in-game purchases, Jason Richelson said…

  • Jason Richelson:

    I give in sometimes.

  • Paul Solman:

    Why do you give in?

  • Jason Richelson:

    Because they keep bothering me.

    (LAUGHTER)

  • Paul Solman:

    Impulsive kids, pestered parents, all overmatched by online credit, cash-free, card-free. And that's why the actual way we finally purchased our ice cream gave me pause.

    You don't accept cash?

  • Man:

    No, we do not, sir, card or Apple Pay.

  • Paul Solman:

    Well, Apple Pay, I don't have.

    A card…

  • Beth Kobliner:

    I could do it. I have Apple Pay.

  • Paul Solman:

    Kobliner uses mobile pay apps, but she does have concerns about them.

  • Beth Kobliner:

    There is a study that looked at mobile pay, and it turns out when you use your phone to buy things, you are more likely to feel that you have got a good deal at that store, because it's like that magic wand. You're getting something for nothing. You're not giving up dollars.

  • Paul Solman:

    Really?

  • Beth Kobliner:

    Yes.

    So, stores really have an incentive to not let us use cash.

  • Paul Solman:

    Even friendly cash-free stores like this one, as if the magic spell of ice cream wasn't troublesome enough.

    For the "PBS NewsHour," economics correspondent Paul Solman, reporting from Manhattan's Lower East Side.

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