Understanding Millennials: What Small Banks and Credit Unions Need to Know
Understanding and supporting Millennials continues to be a priority for small Banks and Credit Unions. As we’ve shared, they now make up the largest segment of the US workforce and stand to inherit $30 trillion over the next decades from their predecessors through what has been defined as “great transfer of wealth”.
Millennials are entering their prime earning years and are doing so with a strong entrepreneurial focus. 54% of Millennials plan to or have started their own business and 27% are already self-employed. This adds a different level of needs when it comes to their financial knowledge.
Here are three ways small Banks and Credit Unions can support and attract millennials to their institutions:
Use transparency to build trust
As digital natives Millennials expect real and full-time access to technology; however, they also expect transparency. Transparency does not just mean open access to raw data but access to information and tools that help them truly understand their finances.
Trust also comes through transparent and authentic relationships. When asked which personal traits they most value, 81% of millennials surveyed chose honesty, followed by loyalty (62%) and responsibility (52%).
Small Banks and Credit Unions can create transparency starting with clear and simple communication to support products, services, and policies. These elements need to be well documented and understood by both clients and employees alike. Technology and tools can be enhanced to enable clients and employees shared views, making it easier to communicate and avoid the perception of hidden fees or policies. As 77% of Millennials prefer to have all their financial products and credit cards with one financial institution, this same technology can enable transparency across portfolios.
Target products and services to financial priorities
Like most Americans, Millenials have two competing financial priorities: paying down debt and saving for the future. What is different from the generations before is the make-up and amount of debt which Millennials have accrued at a relatively young age.
Over 44 million Americans have student loans at an average of $32,731 per borrower and this isn’t their only source of debt. According to a 2018 study, Millennials have an average of $42,000 in debt each of which student loans and credit card debt were the top two sources. While Baby Boomers and Gen X held a similar amount of debt, their top two sources were mortgages and credit cards. Millennials also still hold a fear of traditional credit cards with 25% of millennials describing them as something that worsens their financial standing.
When saving for the future, Millennials say that saving for a milestone like marriage, college, or buying a house, is one of their top financial priorities. Yet only 40% of Millennials say they have good clarity on how much they can afford to spend versus how much they should be saving for the future.
Small Banks and Credit Unions can help by designing products and service that enable Millennials to get a handle on their financial ‘big picture’. Visualization of spending categories can be provided alongside simple to use budget tools which users can customize to their needs. Debt solutions that are transparent and easy to understand can be integrated demonstrating the longer term budget impacts of buying now vs. saving and buying later. Enabling easy ways to save such as rounding up transactions or automatic savings programs can be enhanced with gamified savings goals, providing prompts, encouragement, and reinforcement of client behaviours.
Educate them to build competency
When asked, nearly half millennials say that they do not invest as they do not think they have the money to do so. Yet studies show that 71% of Millennial workers are saving for retirement and at an earlier age than generations prior. One major shift may account for this gap: 42% of Millennials are saving their money conservatively, compared with 38% of Generation X investors and 23% of baby boomers. Millennials hold 25% of their investments in cash, compared to 19% for investors overall. While it is true there is some hesitation and fear from Millennials who witnessed the 2008 financial crisis, a lack of financial literacy and confidence has contributed to these differences.
Millennials find it encouraging when you take an interest in their financial wellness. Specifically, 47% of Millennials would play a more active role in their financial situation if they had an annual or regularly scheduled financial review and had a personalized action plan.
Small Banks and Credit Unions can help through education which can begin even before they have the money to invest. Financial literacy programs need to first and foremost be relevant and educational but also need to be engaging. Financial institutions have many tools at their disposal. When designing a program leverage technology and integrate interactive digital experiences, visuals, and social aspects. Keep segments short and succinct but encourage continued participation through gamification and rewards.
Regardless of how financial institutions choose to distribute their effort, engagement with Millennials is a non-negotiable strategy. There are many unique and creative programs already in the market for inspiration. At Voleo we are halfway through our Voleo Nasdaq Competition student trading competition and are learning lots working with our competition ambassadors. We’d love to share them with you and learn what your organization is dong with Millennials. Reach out to us at firstname.lastname@example.org.