Personal finance in the Digital Age: Are we spending smarter or just faster?

By Dr. Ivy Hii Siaw Hung

Finance in Digital Age

In today’s hyper-connected world, managing personal finances has never been easier – or more complicated. With a tap on our smartphones, we can transfer money, invest in stocks, or even take out a loan in seconds. Financial technology, or fintech, has revolutionised the way we interact with money, making financial services more accessible and convenient than ever before. However, amid the convenience, are we truly making smarter financial decisions, or are we simply spending faster without fully understanding the consequences?

The illusion of financial control

Apps like digital wallets, budgeting tools, and automated investing platforms have created an illusion of control over our finances. Many of us feel empowered by real-time tracking and instant notifications that show exactly where our money is going. Yet, studies suggest that despite having more information at our fingertips, financial literacy remains low.

While these digital tools help in managing cash flow and tracking expenses, they often fail to address deeper financial behaviours and habits. Impulse purchases, emotional spending, and the allure of ‘Buy Now, Pay Later’ (BNPL) schemes have become more prevalent, making it easier than ever to fall into debt traps.

Additionally, the growing use of credit facilities integrated into digital platforms has normalised borrowing, sometimes without individuals fully understanding the long-term impact on their financial health. The perceived ease of repaying later can lead to the accumulation of debts that spiral out of control.

The rise of the subscription economy

Another challenge in the digital age is the rise of the subscription economy. Streaming services, fitness apps, meal kits, and even car subscriptions have turned what were once one-time purchases into recurring expenses. While individually these subscriptions may seem affordable, they can quietly add up to hundreds of dollars each month without us noticing. Many consumers struggle to keep track of these recurring payments, leading to ‘subscription creep’, where they end up paying for services they no longer use.

Managing personal finances in today’s environment requires a proactive approach to regularly auditing spending habits and identifying unnecessary recurring expenses. The ease of signing up for subscriptions needs to be balanced with a conscious effort to review and cancel unused services. Furthermore, the challenge of differentiating between essential and non-essential subscriptions is crucial in ensuring financial priorities are maintained. Consumers must also be mindful of free trials that automatically convert to paid plans, which can add to unexpected expenses.

Social media and peer pressure

Social media platforms have further complicated the personal finance landscape by fostering a culture of comparison. Platforms like Instagram and TikTok often showcase aspirational lifestyles – luxury vacations, designer purchases, and seemingly effortless financial success. This ‘highlight reel’ effect can create pressure to keep up, leading many people to overspend in an attempt to match the curated lives of peers and influencers.

Finfluencers (financial influencers) are also playing an increasing role in shaping financial habits, sometimes offering valuable insights but may also be promoting risky investment trends or questionable financial advice. The accessibility of investment platforms has allowed everyday individuals to participate in stock trading and cryptocurrency investments, but it has also led to increased cases of speculative trading without proper knowledge or risk assessment. Social media-driven financial decisions often overlook key factors such as diversification, risk tolerance, and long-term planning, leading to potential financial losses for uninformed investors.

The need for digital financial literacy

With these challenges in mind, digital financial literacy has become more important than ever. Knowing how to budget, save, invest, and manage debt in the digital age requires a different set of skills compared to traditional money management. Financial institutions and governments have a role to play in promoting financial education that is adapted to the realities of digital spending habits.

Individuals must be equipped to recognise digital spending traps, such as one-click payments, automatic renewals, and personalised marketing strategies that can subtly encourage overspending. In addition, with the rise of speculative investments, cryptocurrencies, and financial trends driven by social media, it is essential to educate consumers on evaluating investment risks to make informed decisions. Budgeting has also evolved with the availability of various digital tools and apps, and it is important to teach people how to leverage these technologies effectively without becoming overly reliant on them.

 Balancing convenience with conscious spending

The future of personal finance will continue to be shaped by technological advancements, but the key to financial well-being lies in striking a balance between convenience and conscious spending. Rather than letting technology dictate our financial behaviours, one must take charge by setting clear financial goals, developing mindful spending habits, and regularly reviewing our financial health.

Ultimately, the digital age offers unprecedented opportunities for financial empowerment, but only if we take the time to use these tools wisely.

Dr. Ivy Hii Siaw Hung is a lecturer and Higher Degree by Research (HDR) Programme Coordinator, as well as Future Student Coordinator, in the Department of Accounting and Finance at Curtin University Malaysia’s Faculty of Business. Before transitioning into academia, she worked in the financial industry as a consultant and analyst. Her research focuses on personal finance, financial behaviour, and consumer behaviour. She has authored numerous journal articles, book chapters, and conference papers. She also serves as a member of the editorial review board and a regular reviewer for academic journals. She has been awarded multiple internal and external research grants and actively conducts financial literacy workshops for youth, students, teachers, and public communities. Passionate about empowering individuals with financial knowledge, she is committed to promoting financial literacy as a key life skill. Dr. Hii welcomes opportunities for collaboration and can be contacted by email at ivy.hiish@curtin.edu.my.