Generational Fraud: Who is Most at Risk?

By Mark Blangger, Research Editor, Association of Certified Fraud Examiners

Everyone in every generation is at risk of becoming a victim of fraud. And with the emergence of the World Wide Web in 1991, the continuing evolution of technology and the fraudsters who are keeping pace with today’s technological advances, the types and occurrences of fraud are ever-increasing.

Fraud affects 25% of North American households annually and costs consumers approximately $50 billion. Here are some brief insights into the generations and the frauds to which they most often fall victim.

Defining the generations

Baby boomers and millennials are probably the generations most mentioned and read about these days, but what about those who were born before the baby boomers and after the millennials? Like many debatable topics, such as which type of fraud is most prevalent, there are differing thoughts, opinions and research results about who those generations are. An article in The Washington Post even states that with the exception of those born in 1948, “generational identity is a lie.” For this article, let’s go with the premise that multigenerational identities do exist and that everyone is a part of — and can identify with — one of them.

The names of each generation also vary, depending on whom you ask. Some researchers (and some nonprofessionals) determined that there are beginning and ending years for each generation, and most agree that the generations might overlap by a few years. The Center for Generational Kinetics (CGK) identifies and defines five generations, which they base on several factors, such as parents’ age, environment in which an individual grew up (rural or urban), education and family affluence. The five generations that CGK uses for its research are:

1. Generation Z: born 1996 to present
2. Millennials (sometimes referred to as Gen Y): born 1977 to 1995
3. Generation X: born 1965 to 1976
4. Baby boomers: born 1946 to 1964
5. Traditionalist generation (sometimes referred to as the silent generation): born 1945 and earlier

Types of common fraud schemes by target generation

Traditionalists (age 72 and older)

Most people who belong to the traditionalist generation are likely retired or looking forward to retirement, which puts them into the category of senior citizens. According to the National Council on Aging (NCOA), financial fraud targeted at seniors is so prevalent that it has become “the crime of the 21^st century” because fraudsters think that older, retired adults have a nice nest egg stashed away. But low-income seniors are equally vulnerable to financial fraud. No matter which end of the financial spectrum they’re on, traditionalists often fall victim to fraud scams such as these identified by the NCOA:

1. Medicare and health care scams (receiving and being billed for unnecessary services)
2. Counterfeit prescription drug scams (great price, fake drugs)
3. Funeral and cemetery scams (selling nonexistent cemetery plots)
4. Anti-aging product scams (money-back guarantee, refund never received)
5. Telemarketing and phone scams (grandchild impersonator calls requesting a loan) 

Baby Boomers (age 53–71)

Those in the upper age range of the baby boomer generation are also sometimes classified as seniors, and many of them aren’t far behind the traditionalists when it comes to retirement. After more than 40 years in the workforce, some boomers managed to save enough money to enjoy their twilight years, and some of those at the younger end of this generation are looking to investment and financial professionals to help them build their retirement reserves. But, whether it’s their life savings or their financial investments at risk, baby boomers, like traditionalists, are often targets of financial fraud, such as:   

1. Contractor fraud (roofers, remodelers request advance payment and don’t return to do the work)
2. Medical fraud (being billed for services not received)
3. Reverse mortgage fraud (the lending agency takes the majority of the equity)
4. Bereavement fraud (ads pre-selling caskets that are never delivered when needed)
5. Investment fraud (pyramid and Ponzi schemes)

Generation X (age 41–52)

There are Gen Xers — some being the offspring of baby boomers — who wonder whether they’ll ever be able to afford retirement. Some are still raising their children, others are paying their kids’ (e.g., millennials) college tuition, some are serving in the military or are military veterans and others are caregivers for their aging parents. An infographic by Experian, one of the three national credit bureaus, indicates that Gen X has the largest debt, averaging $111,121. Adding to, and often because of, the financial disparages of the younger members of this generation is the fact that they are among the most vulnerable succumbing to scams, including:

1. Credit card scams (giving credit card numbers over the phone)
2. Debt relief scams (ads offering debt consolidation — for a price)
3. Mortgage refinance scams (mortgage refinance offer that requires hundreds or thousands up front)
4. Military scams (calls to military families saying their service member needs money)

Millennials (age 22–40)

Although the baby boomers had outnumbered the other generations for years, millennials recently became the largest population at approximately 83.1 million compared to the boomers’ 75.4 million. While retirement is not on the minds of every member of this generation, many are already putting the financial wheels in motion for their later years. And having grown up in the age of advanced technology and an online, socially connected world, many millennials don’t consider themselves vulnerable to scams. Scams that often target millennials include:

1. Job scams (being charged hiring fees or paying for work-at-home kits)
2. Using unsecured public Wi-Fi (the connection is actually to a computer-to-computer network, allowing the user to access the internet and the hacker to access the user’s computer)
3. Online shopping scams (fake online retailers require payment in the form of a money order or wire transfer)
4. Tech support scams (being told to purchase repair software for a detected virus — no virus, and the software is worthless or never received)
5. Smishing scams (fraudulent texts that appear to be from a legitimate source, such as the user’s bank notifying them of suspicious charges)

Generation Z (age 21–newborns)

Although they rarely make it into the top news stories of the day, the Gen Z population in the U.S. is likely to reach 84.7 million in three years, outnumbering millennials. Members of this group are already entering the workforce, others are studying at or preparing to enter institutions of higher education and then there are those who, based on the age range, are entering the crawling stage of childhood. Like all other generations, Gen Z is not immune to scams, and here are just a few:

1. Federal student tax scams (student loan debtors are told they will be arrested if they don’t pay their student tax; there is no such thing)
2. Social media scams (clicking on shortened URLs on social media sites might download malware)
3. Cybersecurity scams (pop-ups on computers or smartphones informing user of a free trip, cash, job opportunity etc.) 
4. IRS impersonator scams (caller says the IRS has filed a lawsuit against the individual for nonpayment of taxes and demands payment)

So Which Generation Is Most at Risk for Fraud?

Members of the traditionalist generation — senior citizens — have become the stereotypic poster child for victims of fraud, especially elderly women who live alone. But with the changing times comes a shift in vulnerabilities. A study by the Better Business Bureau (BBB) found that 89% of participants age 65 and older were savvy enough to recognize and avoid attempted scams, and only 11% reported actually losing money.

Co-author of the study, Rubens Pessanha, stated, “Optimism bias — the idea that we all think other people are more vulnerable than we are — is associated with risk-taking and failure to heed precautionary advice.” Ironically, members of the generation who express optimism bias are the ones most at risk. So who are they?

Millennials. More than three times as many study participants in the 18–24 age range (which includes Gen X) failed to recognize the same scam as the seniors, and 34% reported a financial loss. The results of a Gallup poll indicated that 44% of millennials believe that the companies they conduct business with keep their personal information private “all” or “most of the time,” while only 29% of traditionalists and 32% of baby boomers and Gen Xers believe their information is safe.

It seems that millennials’ adeptness at using today’s technology has yet to override their naiveté regarding fraud and how it’s perpetrated.