Spend it even if you don’t have it

On the weekends young women often go on a spree, having pizza, taking in a movie and visiting the beauty parlor and then a karaoke room, paying full price at none of those stops. They are not good negotiators, but rather, good consumers, taking advantage of discount programs offered by mobile phone service providers.
But there is a down side to their savvy ― overspending, a condition that has snared many Koreans in a debt trap.
Choi Ye-nyang is a typical member of Korea’s youth market. Ms. Choi, 23, is a college student living with her parents, who help her pay her bills, including her tuition. But she struggles at the end of each month with anxiety over money. “It does not matter how much I earn,” says Ms. Choi, who tutors high school students part-time. “The money is never enough. I eat out a few times, buy a card to ride the subway, have a few drinks with friends and pay my mobile phone bill; the money is gone like that.”
Ms. Choi, who says she spends an average of 400,000 won ($350) a month, provided the JoongAng Daily with a detailed accounting of her monthly finances:

Meals outside school cafeteria: 60,000 won
Miscellaneous (gifts, etc.): 90,000 won
Books/movies: 60,000
Transportation: 150,000 won

Last month Ms. Choi engaged in a budget buster: buying on impulse. She spent an extra 300,000 won on a digital camera, using money she earned working at a children’s summer camp for six weeks. She has no savings, and she apparently has no plans to start setting aside money. Ms. Choi says there are a lot more things she wants to buy. And there are a lot more things stores would like to sell her.
Just 10 years ago, college students had a narrow number of choices when it came to spending. Inexpensive jewelry sold at street stalls or low-priced cassette players were about all that was available. Today the youth market overflows with choice -- the latest models of mobile phones, MP3 players, handheld computers, digital cameras and luxury clothing and accessories.
The nation’s youth have enriched many Korean companies, from apparel makers to health clubs, which are especially adept at separating teenagers and twentysomethings from their money.
According to a recent survey by Yonsei Annals, a weekly campus newspaper published by Yonsei University, about 28.4 percent of 1,086 respondents said they spend 300,000 won a month. Fifteen percent said they spend 400,000 won, whereas 18 percent said they spend up to 600,000 won or more. Almost half of the respondents said they had no savings.
With lifestyles practically guaranteed by doting parents and free of obligations that knife through most household budgets, such as dental care and mortgage payments, Korean students wield consistent economic influence. One factor behind the dramatic increase in student spending is the expanding number of retailers setting up shop around colleges. A walk through any one of these areas is to steer through an obstacle course of hawkers for coffee shops, clothing stores, bars and mobile phones. In the carnival atmosphere, not much is needed to pry open a wallet or purse. The lack of university regulations for merchants and advertisers encourages them to wade onto campuses to promote their products, some retail booths are even sponsored by the student union or other campus organizations.
“The campus sometimes seems like a commercial Disneyland,” says Ha Hae-jung, a senior at Yonsei. “More and more companies see universities as one big trade center, and in reality the discount prices are just about the same as shops elsewhere.”
Kim Go-eun, a student reporter at the Korea National University of Education, says students in Korea lead an unhealthy financial lifestyle due to an academic setting that leaves them vulnerable to the evils of crass commercialism.
Indeed, what appeared to be a gold mine for marketers has turned into a tar pit lined with the misuse of credit, which is practically given away.
According to the Financial Supervisory Service, there are 100 million credit cards in use in Korea, more than two cards for every man, woman and child in the nation. As of the end of May, about 3 million card users had been blacklisted by the Korean Federation of Banks for failing to meet payments on debts of more than 300,000 won for three months. Of these scofflaws, more than half were in their 20s and 30s.
Another problem is the complete absence of consumer education at the nation’s schools. Personal history has taught most students that mom and dad will wipe their child’s financial slate clean.
In another survey, up to 47 percent of university students said they turn to their parents to bail them out financially. Only 15.3 percent of Korean students said they are financially independent from their parents, a striking contrast compared with 51.9 percent of college students in the United States who say they pay their own way and 24.2 percent of Japanese students who make that claim.
“Students are bombarded with all sorts of purchasing possibilities even before they have been trained to control their spending,” says Ms. Kim, the student reporter.
“It’s a vicious cycle,” says a 23-year-old Seoul student. “When the end of the month arrives there are just too many bills for me to pay at once, including all the installment purchases from the previous months, mobile phone bills and subway cards. Once I make the payments, I am broke again for the rest of the month, so I start from the beginning.”
Parents used to feel the home shielded their children from bad influences, and that they would take an assortment of caveats with them when they went out the door. But today trouble lurks under the most financially secure roof in the form of the Internet. Marketing research by the National Statistical Office in 2002 shows that about 25.2 percent of Internet users have made online purchases -- about 9 percent more than in the previous year -- for goods valued at less than 100,000 won. Of that number, 32 percent were consumers between the ages of 20 and 29.
In a generation knitted together by digital appliances, the latest trend can propagate in literally seconds, and usually the cutting-edge of fashion is luxury items.
Choi Sun-hwa, a senior researcher at the Samsung Economic Research Center, notes what she calls the tendency for female university students to imitate the fashion and lifestyles of people they admire, usually pop stars and actresses.
From clothes to electronic devices, Ms. Choi says, this “bandwagon effect” among the younger generation reflects a strong desire to express a sense of belonging and cultural identity through consumption.
While alarms have been sounded over misguided capitalist youth, Park Tae-il, a senior researcher at the Hyundai Research Institute, sees this trend among young Koreans as a positive sign.
“Students today tend to care less about a grand political theory or historical insights. But they place meaning on what they spend their money on. For them it is a way of expression, a sign that they care about themselves,” Mr. Park says.
Others, however, contend that companies are promoting over consumption among the jejune young to fatten their bottom lines.
Ms. Choi at Samsung writes in her report, “Duality of Consumption,” that companies encourage teenagers to follow the crowd.
The Financial Supervisory Service published “Know-how for Credit Management” earlier this year for students between the ages of 20 and 30.
“It’s important to understand the proper use of credit cards before you sign up for one,” it says. “Check regularly on your credit status, and spend reasonably.”
Kang Jung-hwa, a director at Consumer Unions of Korea, says many Korean students are taking a passive role in planning their expenditures.
“Many of them are not trained to make practical decisions on consumption,” Ms. Kang says.
“Indeed many students are not even aware of their own spending patterns, because their parents pay all the bills. They rely on their parents to take care of them. And that’s a problem concerning many facets of the students’ lives, not just the way they spend their money.”

by Park Soo-mee