The conundrum of millennial money-managementMay 23, 2017
Generation Y. The digitally-savvy. The future of the workforce. Millennials have been labelled as such and intensively analysed through these lenses in a quest to understand what makes them tick.
But no characteristic attributed to millennials evokes debate quite like their ability to money-manage.
Recent statistics have revealed that, with 79%, millennials will be the biggest recipients of an estimated £6.5bn in loans from ‘the bank of mum and dad’ this year.
The loans will primarily help fund property purchases for first-time buyers, but the need for such financial support has drawn criticism in some quarters.
Tim Gurner, Australian property tycoon and the youngest person on Business Review Weekly’s 2016 Rich List, made headlines this week when he advised millennials to stop ‘’buying smashed avocado for $19 and four coffees at $4 each’’ if they hoped to get on the property ladder.
But, with the average deposit for a home in the UK reaching £32,000 in January, is this a totally fair assessment of the modern millennial’s financial outlook?
The answer is no.
In fact, despite an unpredictable economy, high post-graduation debt, dwindling interest rates and high rental prices, a recent HMRC study indicated that the UK’s millennials are proactive savers: A record 2.7 million+ under-35s are now contributing to a personal pension – up 30% compared with last year.
On the other hand, a sizeable 32% of millennials are not actively managing their finances, despite growing concern about the future of their financial status. A further 63% are relying on a one-off event such as a family inheritance or promotion at work to help them in the future.
One argument suggests that this is due to a lack of access to education in financial management: over a quarter (28%) of millennials admit that they have never learned how to manage their money effectively, while 48 per cent of UK millennials do not receive any information on financial matters through their workplace or educational establishment.
Despite arguments to the contrary, millennials are not complacent when it comes to financial literacy. They actively search for help and advice from financial institutions, but find that this often falls short of their requirements.
A study by uSwitch found that 20% of millennials sought general advice on good money-management from their banks, with 67% saying they would like to be alerted via their banking apps for higher than expected bill payments.
However, only a third of 18-34 year olds consider their banks’ product suites as helpful in coping with the financial challenges faced by their generation.
With one in four millennials believing that tech companies would do a better job of delivering financial services products than banks, it is time for the FinTech industry to step up and deliver to these expectations.
FinTech has the potential to deliver agile, customer-centric banking products and cater to the modern consumer’s digital lifestyle. As this blog demonstrates, however, it will be critical for financial institutions new and old to understand exactly what advice millennials want and how to deliver this to them.
For example, although it is crucial for banks to deliver a first-class digital proposition, young people are visiting bank branches more regularly than any other generation, especially to discuss important financial decisions.
In a busy market, banks must take note of this trend and ensure that all customers can easily access face-to-face support when they need it. A service proposition that effectively combines digital innovation with practical advice will give financial institutions a competitive advantage when engaging with millennials.
PCT works with socially responsible financial institutions such as Change Account to help deliver fit-for-purpose financial products to underserved demographics. Featuring secure budgeting wallets, clear payment alerts, and extensive advice and support, Change Account is a genuine transactional account alternative that enables better money-management for all customers.
Following this model will be crucial in driving positive competition in the current account market to ensure that millennials, as well as other underserved groups, are better served both today and in the future.
PCT’s cloud-based digital banking platform bank.VISION enables businesses to secure rapid market entry at a fraction of the usual cost and deliver banking-grade financial services to customers online, in-branch or via a mobile device.
Visit our bank.VISION page to find out how your business can leverage this technology to deliver a tailored banking proposition to the 13.8 million millennials in the UK today.
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