"No Spending or Anything... Just Failed" Sighs Over Investment Failures Among 20s and 30s

Economic Recession... Increasing 20s and 30s Seeking Rehabilitation Court Due to Stock and Coin Investment Failures

As the recent stock market shows a downward trend due to the economic recession, the sighs of young investors in their 20s and 30s are growing deeper. Photo by Getty Images Bank

[Asia Economy Reporter Han Seung-gon] # Kim, a man in his 30s who works as an office worker and suffered a major loss in stock investment, complains of depression. Even when he sees the 'No-Spending Challenge' (a lifestyle habit of saving immediately after leaving only minimal living expenses), which is popular among the MZ generation during the economic downturn, he sighs, saying, "I only have debt left, what no-spending? I'm ruined."

As the stock market falls into a slump amid aggressive interest rate hikes, the sighs of people in their 20s and 30s are growing deeper. Despite showing enthusiasm by making 'Yeongkkeul' investments (borrowing to the fullest extent possible), they have not only failed to make profits but also have not been able to secure their principal properly.

For example, KakaoPay, which was very popular among the MZ generation, is now in a bleak situation. According to Samsung Securities, nearly half (44%) of the subscribers to KakaoPay's IPO in October last year were MZ generation subscribers in their 20s and 30s. By age group, those in their 30s accounted for 26.3%, and those in their 20s accounted for 17.7%. The proportions of other age groups were ▲ 40s 24.1% ▲ 50s 20.4% ▲ 20s 17.7% ▲ 60 and above 11.5%, respectively.

However, the current situation is dire. According to the Korea Exchange on the 20th, KakaoBank, which was ranked 11th in market capitalization at the end of last year, has plummeted to 44th place. Its market capitalization is currently 8.2934 trillion KRW, down 70.42% (19.741 trillion KRW) from 28.0344 trillion KRW at the end of last year. As employees suffered large losses, KakaoBank decided to establish a company fund worth 10 billion KRW to support loans.

The number of young people seeking rehabilitation courts due to investment failures is increasing.
[Image source=Yonhap News]

Meanwhile, cryptocurrencies (coins) also experienced a sharp decline due to the US inflation trend and other factors. As investments in coins and stocks fail, the number of young people applying for personal rehabilitation is increasing.

According to the Seoul Rehabilitation Court, the average monthly number of rehabilitation applications by people in their 20s was about 245 in the first half of 2022, but increased to 322 in July and 315 in August. In July and August, the proportion of people in their 20s among all rehabilitation applications was 19.6%. When including those in their 30s, the proportion of personal rehabilitation applications by people in their 20s and 30s was 51.4% (836 cases), accounting for more than half. They are essentially buried in debt and end up applying for personal rehabilitation.

With the stock index falling and high interest rates coinciding, the risk factors of financial investments such as stocks have increased, leading some to engage in so-called 'windmill rotation' financial strategies. For example, they subscribe to a new installment savings product every month and then collect the principal and interest sequentially from the maturity date to prepare a lump sum. The market response is not bad. Shinhan Bank's installment savings product, which offers an annual interest rate of up to 11%, launched on the 2nd, surpassed 5,000 new accounts in just four business days. Also, Welcome Savings Bank's installment savings product, offering an annual interest rate of up to 10%, achieved 10,000 sales within one week of its launch on the 6th.

Interest in 'credit card windmill rotation' is also growing. This refers to a financial strategy that maximizes benefits by repeatedly receiving cash-like support provided to new card issuers by card companies and then canceling the cards. However, excessive issuance of credit cards can lower credit scores, so caution is necessary.

An expert on personal rehabilitation urged young people to operate investments with a plan. A representative from a law office said, "Recently, consultations for rehabilitation among young people have increased, and a common point is that there are many reckless investments," adding, "Investing all of one's assets is very risky." He continued, "Planned investment and conducting investments after sufficient consultation with experts are ways to reduce risks."

This content was produced with the assistance of AI translation services.