Financial institutions are still struggling to reach millennials, and it's clear that the operating status quo for banks, credit unions, and other financial services companies is not cutting it. As a result, many are looking for new approaches to connect with the often elusive millennial generation.
The first step to understanding the relationship between millennials and money is to understand millennials. The generation, typically defined as anyone born between 1980 and 2000, differs fundamentally from previous employees in the workforce - millennials stay at their current job for less time, prioritize flexibility in the workplace, and are getting married and starting families later than previous generations. Whether these are directly or indirectly linked to millennials’ relationship with money, it is impacting the way that millennials use their money.
One factor contributing to these changes is the rising price of a college degree, and the resulting increase in both the number of students taking student loans and the amount of those loans. Millennials graduate from college with considerably more financial strain now than their counterparts did 20 years ago. Student loans are now a large part of millennials’ fixed monthly expenses, and they often lack either the income to pay their expenses or the knowledge of fundamental financial planning - a precarious combination that can lead to dangerous credit card spending, defaulting on loan payments, and risky monetary behaviors.
Ben Offitt, the Chief Financial Planner at Clear Path Advisory, identified key access points for reaching millennials, and helping the members of this generation develop better financial knowledge. According to Offitt, most millennials fail to develop a budget that includes saving for future expenses - like retirement or a down payment on a house. When discussing money with millennials, he recommends using an approach that curbs spending now, and in turn allows millennials more flexibility in the future. Millennial spending habits are already quite unique compared to other generations - they are getting married later to delay the costs of a wedding, buying homes and cars at a lower rate than previous generations, and prioritize spending on experiences, like travelling and music festivals, over items. “Everyone has finite resources,” says Offitt, “but it’s about splitting your dollar and creating an infrastructure that can allow you more freedom with your money.”
But Offitt recognizes that millennials often have different priorities, and that financial institutions also need to demonstrate how they can help millennials achieve their goals now. Many millennials are burdened with large, monthly student loan payments that are more daunting than saving for their 401k.
When attracting millennial customers, it is important that financial institutions identify the unique limitations and budget concerns of each young professional, and then build a plan that works for that individual; solely talking about saving for retirement or a down-payment on a house will only alienate millennials who are struggling to make ends meet in the present. This is important for millennials at any income level. However, most young professionals fail to understand the positive impacts that result from engaging with financial institutions. With the rise of banking alternatives like Venmo, online retirement saving websites, like Betterment, and apps like Acorns that invest “spare change” in exchange-traded funds, financial institutions are getting less face time with millennials. As millennials are turning to to mobile alternatives for their traditional banking needs, banks need to increase their mobile and digital offerings to keep and continue to attract millennial clients.
While there is no easy path to financial success for anyone, financial institutions can reach young professionals by emphasizing what is important to them, whether that is helping them maintain a lifestyle despite student loan debt, save for a future family or retirement, or take that important first step —a new car or house. The hardest part is making the first connection. At Carousel30, we focus on making connections, including connections to your audiences. Contact us today to learn more about we can help you make connections of your own.