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Pay it forward: 1 in 5 gen Zs have accessed their pay ahead of time

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A considerable number of Australians are turning to pay-on-demand services to access their salary ahead of time, according to new research by Finder.

A nationally representative survey of 1,007 respondents revealed 8% of Australians – equivalent to more than 1.5 million people – have used a pay-on-demand service.

Worryingly, the research shows that more than 1 in 5 generation Z Aussies (22%) have used a service, compared to 11% of millennials and less than 1% of baby boomers.

This isn't surprising considering gen Z are the lowest-income generation, and are also the most likely to say they are "extremely stressed" with their financial situation (27%) compared to other generations.

Kate Browne, personal finance expert at Finder, said accessing your pay ahead of time can be enticing, but it does come with downsides.

"While pay-on-demand services like Beforepay are relatively new, they are essentially just short-term loans and should be treated with the same caution.

"They can be useful for a short period of time, like if you're faced with a large, unexpected expense in the middle of the month, or if your income has fallen short.

"On the flipside, having regular access to your income before payday can lead to poor money habits, such as overspending and being unable to save," Browne said.

Finder's survey found men (12%) are more likely than women (4%) to access their pay in advance.

Browne said pay-on-demand services can cost a substantial amount in fees, which can be as high as 5% of the amount borrowed.

"For a $500 loan, that's a $25 charge – not something you want to be shelling out for every month.

"That's in addition to any late fees or interest charges if you don't repay the loan on time."

Browne said there are different kinds of loans available.

"There are employer-offered services, like InstaPay, which charge employers to let their employees access their pay ahead of time. These services are generally the cheapest option for employees.

"Then there are third-party apps like Beforepay and MyPayNow, and bank-offered services like CommBank AdvancePay, which tend to be more costly."

Browne encourages Aussies to think carefully about the implications of short-term loans.

"Before borrowing money, your first port of call should be your savings if possible.

"If you do decide to take out a payday loan, make sure you compare providers beforehand to make sure you're not paying a cent more than you have to in fees.

"It's also a good idea to put together a monthly budget that accounts for your income as well as your regular expenses, to make sure you avoid running out of money before the end of the month."

Have you ever used a pay-on-demand service to access your pay ahead of time?
Source: Finder survey of 1,007 respondents, August 2021

Looking for some quick and easy ways to save money? Check out Finder's 50 money-saving tips.

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