Rising Trend: Why Generation Z is Vulnerable to Financial Scams

The recent incident involving a financial advice columnist at The Cut losing $50,000 in a scam has caused a significant stir on the internet. However, this story may resonate with many young adults. Despite their proficiency in digital technology, Generation Z—those born between 1995 and 2012—are more than three times as likely to fall for online scams compared to baby boomers, as indicated by a 2023 Deloitte report.

Experts attribute this vulnerability to the fact that scams are often tailored specifically to the younger generation, over half of whom spend an average of at least four hours per day on social media. Jonathan H. Swanburg, President of TSA Wealth Management, has observed that while older generations are frequently targeted through email and phone phishing schemes, younger individuals may encounter appealing investment advertisements on platforms such as Facebook, Instagram, or TikTok that promise substantial returns with minimal risk.

According to financial planners, these get-rich-quick schemes often exploit a generation burdened by inflation, high housing costs, and increased debt. Simultaneously, younger adults tend to be more trusting of information they encounter online, as per a 2022 Pew Research Center report, which found that adults under 30 trust the information on social media almost as much as national media outlets.

Catherine Valega, a certified financial planner, stresses that the sheer volume of unverified information available on social media has exacerbated the situation for the younger generation. She highlights that they may not scrutinize the credibility of the sources the way they would for a property manager, making them more susceptible to falling for fraudulent schemes.

The financial repercussions of falling for a scam can be severe. In 2023, consumers lost over $10 billion to fraud, a 14% increase from the previous year, according to data from the Federal Trade Commission (FTC). Furthermore, with scammers becoming increasingly adept at disguising their messages as legitimate communications from banks, the risk for young adults, who are more comfortable conducting their lives online, continues to rise.

Andrew Fincher, a certified financial planner, cautions that advancements in AI technology have made scams more sophisticated and convincing. He highlights that younger adults, who are more likely to conduct their finances online, are at a higher risk of falling victim to security breaches due to their reliance on mobile banking and the habit of using similar or easily guessable passwords.

In a broader context, Valega believes that the older generation, having never been as reliant on online platforms, approach digital information with a greater sense of suspicion, which acts as a protective barrier against falling for online scams.

It is evident that the susceptibility of Generation Z to financial scams is a growing concern. With the increasing prevalence of online scams and the resulting financial losses, it is crucial for young adults to exercise caution and discernment when engaging with investment opportunities and financial information online.