How Peer-to-Peer Payment Services Help Millennials and Gen Z Plan Financially

Every generation has its own way of using money. And for Gen Z and millennials, that means taking advantage of peer-to-peer payment services such as Venmo, PayPal and Cash App.

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These platforms offer convenience and functionality that can significantly aid in financial planning and wealth growth. Experts note that overall, they’re an incredibly useful financial planning tool.

“With smart use of automation and cost-splitting features, these apps can help build strong money habits and financial security for younger generations,” said Ben Klesinger, co-founder and CEO of Reliant Insurance Group and Helping Hand Financial. “The convenience they provide encourages regular saving and smart spending, which are skills that will benefit users for life.”

Below, experts dive into how these services are making a dent in the way Gen Z and millennials play for the future .

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They Encourage Better Spending and Saving Habits

“As a finance executive who works primarily with Gen Z and millennial clients, I’ve seen how peer-to-peer payment services are helping them better manage their money,” Klesinger said.

These apps make it easy to instantly transfer funds between friends, pay bills and split costs. And this convenience encourages better spending and saving habits.

“For example, many of my clients use services like Venmo and Cash App to automatically split rent, utilities and streaming services with roommates each month,” Klesinger said.

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According to Klesinger, this automation helps ensure bills are paid on time and prevents overspending.

“These apps also make it easy to save small amounts regularly by rounding up purchases to the nearest dollar and transferring the change to a savings fund.”

Over time, those small amounts can add up to hundreds or thousands of dollars.

They Help With Budgeting and Expense Tracking

Peer-to-peer payment services provide an easy way for Gen Z and millennials to track their spending.

“Many of these platforms offer features that categorize transactions, making it simpler to monitor where their money goes each month,” said Brian Chasin, CFO at Soba New Jersey .

By reviewing these categorized expenses, users can identify spending patterns, cut unnecessary costs and create a more effective budget .

“For instance,” he said, “someone might notice they are spending too much on dining out and decide to cook more meals at home, thus saving money that can be redirected into savings or investments.”

They Help Gain Real-World Budgeting Experience

Experts equally note that peer-to-peer payment services provide an easy way for younger generations to gain real-world budgeting experience.

“Splitting costs for group trips, dinners out and entertainment helps them think more critically about their spending in social situations,” Klesinger said.

For those just entering the workforce, these apps also make it simple to start building an emergency fund by automatically transferring a portion of each paycheck to a separate account.

They Promote Peer Accountability and Financial Transparency

Another benefit of these services is the peer accountability and transparency they foster.

“Many platforms offer transaction histories that can be viewed by both parties, which encourages users to be more mindful of their spending and repayment habits,” Chasin said.

For example, if friends frequently lend money to each other, the transparent records help ensure that loans are repaid promptly.

“This accountability can promote better financial habits, such as timely payments and responsible borrowing, ultimately leading to improved financial health.”

They Offer Immediate Transfers and Cash Flow Management

Another perk to using these payment services is that it allows for immediate transfers, which is crucial for effective cash flow management.

“For those who freelance or work gig jobs, receiving instant payments ensures they have access to their funds without delay,” Chasin said.

This immediacy can help in paying bills on time, avoiding late fees and keeping their financial obligations on track.

“Additionally, immediate access to funds enables users to quickly move money into high-yield savings accounts or investment platforms, maximizing their wealth-building potential.”

They Facilitate Investments and Long-Term Savings

“Some peer-to-peer services now offer features that directly facilitate investments and savings,” Chasin said. “For example, Cash App allows users to buy stocks and Bitcoin, while PayPal has integrated cryptocurrency trading.”

These features make it easier for young people to start investing with small amounts of money, breaking down barriers to entry.

Experts note that by regularly transferring small sums from their main accounts to investment accounts, Gen Z and millennials can gradually build a diversified portfolio, helping them grow their wealth over time.

“Concrete example: A young professional might use a peer-to-peer payment service to receive payments from side gigs and immediately transfer a portion of that income into a high-yield savings account.

“Over a year, this consistent saving habit could result in a significant emergency fund. Simultaneously, the individual might use the service’s investment features to regularly purchase fractional shares of stocks, gradually building an investment portfolio.”

These strategies collectively enhance financial security and promote wealth growth.

From budgeting and expense tracking to facilitating investments, these platforms provide essential tools for managing money more effectively and building a secure financial future.

This article originally appeared on GOBankingRates.com : How Peer-to-Peer Payment Services Help Millennials and Gen Z Plan Financially