As Jan would say, “Millennials, millennials, millennials.” It seems like everyone is talking about them, studying them, and trying to understand them.
And when it comes to finances, millennials certainly are an interesting case. Many graduated or began job hunting during the great recession, leaving them unemployed or behind-employed as costs of living continued to rise. In fact, now a decade after the great recession began, millennials are earning 20 percent less than older generations did at this point in their lives.
That financial turmoil, combined with an increasing emphasis on digital living and social proof for daily decision making, has positioned millennials uniquely in the financial landscape. And technology has a huge role to play in meeting millennials’ financial needs, allaying their worries, and setting them up for successful futures.
Here are seven truths about millennials’ finances and what tech can do to help.
1. They stress more about money.
Sixty-seven percent of millennials report that financial stress distracts from their ability to focus at work. They are also used to having information at the touch of a button, anytime and anywhere. Therefore, technology can help alleviate their stress by providing easy access to personal financial information.
Mint‘s dashboards and app, for example, can house budgets and login information, while automating reminders for bills so users don’t get late fees. PocketGuard connects to customers’ bank accounts to essentially tell them exactly how much spending money they have. And HelloWallet sells tech tools to employers who can use them to help their team members better plan for retirement and take advantage of benefits.
2. They are still in student debt.
Nearly two-thirds of millennials have at least $10,000 in student debt and one-third have more than $30,000. This level of debt is holding the generation back from making the same financial commitments (such as home buying) at the same rates as older generations.
A couple of companies are already using tech to help millennials with their debt. Earnest, for example, uses a unique data algorithm to qualify clients for a student loan refinance. They also provide a mobile app and user-friendly dashboard for tracking pay-offs. As with SoFi, there is no office to visit, but customers can chat or text with a rep anytime, just the way millennials like it.
3. They are earning on their own.
More than half of millennials surveyed by Deloitte have started or planned to start their own business within a year. Furthermore, 38 percent of millennials are freelancing. This new trend towards entrepreneurship and the gig economy means millennials have more finances than ever to manage, from taxes to payroll to invoicing.
Due is a company making it easier and cheaper for business to accept payments online while Sighted integrates payments with paperless invoicing and receipts. These and other companies are building faster, easier, and more automated tools to take the financial burden of running a freelance or small business off of millennial owners.
4. They want to invest with heart.
More than 80 percent of millennials are interested in socially responsible investing, using their dollars to not only bolster their own finances but to bring about positive social change.
Aspiration is a bank that is using data analysis to measure the environmental, workplace, and governance practices of companies in their investment portfolio. Grow is using a proprietary digital platform to connect investors with companies that care. And Motif offers automated socially responsible investing. The legacy players are trying to get in on the action too, Morgan Stanley has an Investing with Impact platform.
5. They don’t trust banks.
More than 70 percent of millennials would rather visit the dentist than listen to what a banker has to say. Having grown up with bank scandal after bank scandal headlining the news, the generation is wary of existing financial institutions and tends to associate traditional banking with greed.
Financial technology startups are arising to fill the gap between millennial’s expectations of banking and reality. Examples include Lending Club, a fully digital peer-to-peer lending marketplace; Wealthfront, which replaces human advisors with an algorithm, and Robinhood, which eliminates stock trading fees and allows you to trade from your phone.
At the same time, the big banks are trying to play catch up, seeking to add more mobile-friendly features and even investing in the startups that are trying to “disrupt” their industry.
6. They aren’t saving.
Millennials are saving money at -2 percent, lower than any other generation. When it comes to changing this way of operating, automation is the name of the game.
Millennials have grown up with credit and debit cards, direct deposit, and automated bill pay. Many simply aren’t used to thinking about their budgets and savings on a daily basis. Digit is a tool that automatically calculates how much its customers can afford to save and sets it aside. Qapital is another fintech company filling this space, they play on millennials’ love of gamified experiences by asking customers to save towards a specific goal like a trip.
7. They don’t understand money.
Only 8 percent of millennials have a high-level of understanding about finances, despite the fact that 70 percent think their level of understanding is solid. This gap between perceived and actual knowledge could result in more financial mistakes being made and less financial advice being sought.
Technology can play a role in arming millennials with better financial literacy by providing that education in the ways that are most natural to the generation. One of the biggest opportunities in this space is in gamification. Gamified tools can help users change their behaviors and improve their knowledge by making banking fun and centered around a challenge.
The technological and social environment that the millennial generation has grown up in has had an enormous effect on their approach to finances. From mobile-first to automation to gamification, technology has a huge role to play in their financial lives. Companies who want to succeed in today’s landscape must adopt and innovate on these tools.
Need a little help wrangling in the millennials? Check out some gamification software options or contact one of our unbiased Technology Advisors.
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