Michigan Legacy's Technology and Alternative Payment Methods Highlight Need for Strong Financial Literacy
As digital payments become more common and alternative financing options continue to grow, financial experts are raising concerns about the impact these trends may have on financial literacy and long-term money management habits.
Carma Peters, President and CEO of Michigan Legacy Credit Union, says growing up in a largely cashless environment can make it more difficult to develop foundational financial skills.
“Gen Z is the first generation to grow up in a cashless society, and I think there’s a price to pay for that. For starters, the mental math of counting out cash in a financial transaction is absent,” Peters said. “There can be less inclination to think about what’s behind the numbers – a foundation of financial literacy - when someone taps to pay.”
Peters also points to the rise of Buy Now, Pay Later (BNPL) services as another factor that can impact budgeting and financial responsibility.
“Back in the day, the option of layaway was akin to buy now pay later, yet there was one huge distinction; you didn’t get the item you were purchasing over time until it was fully paid for,” Peters said. “Now, you can use services like Affirm or Klarna to pay for shopping in installments, like makeup, clothing, and purchases as low as $50 from retailers such as Target, so it makes it very easy to rack up bills, especially because you get the products instantaneously. Additionally, social media apps like TikTok and Instagram constantly present ads that are curated to an individual’s personal style and interests, creating temptation to buy something without considering where the purchase fits into your budget, if at all.”
While fintech tools can offer convenience, Peters notes that popular apps including Venmo and Zelle are not federally regulated or insured, unlike services offered through credit unions and banks. She also emphasizes that these platforms are not designed to provide financial advice, expertise or budgeting support.
Recent survey findings indicate that many young adults feel they have lost ground compared to previous generations when it comes to wealth accumulation. Economic uncertainty, rising housing costs and student loan debt have shifted many consumers' focus toward short-term financial challenges rather than long-term wealth-building.
However, Peters says those challenges do not have to define an individual’s financial future, particularly for those willing to improve their financial knowledge and seek trusted guidance.
“Gen Z is strongly encouraged to establish a relationship with a financial institution. Credit unions and banks are well equipped to discuss basic financial information with their members and account holders and offer sound advice for saving, borrowing, and getting a credit card with the best interest rate,” Peters said. “Then, when key financial decisions like buying a vehicle or home, or deciding to engage a financial advisor arise, young adults have a trusted partner to inform their decision-making.”
Peters adds that understanding basic financial concepts is essential for making informed decisions and building long-term financial success.
“When young adults understand terms like credit score, interest rate, compounded interest, money markets and certificates of deposit (CDs), they are well on their way to being financially literate,” Peters said. “Whether it’s for saving, buying an automobile, home, clothing or a household item, financial literacy is critical to financial success.”
Explore the research referenced in this article here
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