Millennial Money Management

Table of Contents

1. Millennials and money: What's new?
2. Why the big shift from cash to digital payments?
3. What are the hubs for millennial money?
4. Investing in the economy of the future
5. What percentage of millennials have student loan debt?
6. What are digital payments?
7. What kinds of digital payments are there?

These days, millennials are the generation driving much of the economy. Now ranging from 25-40 years old, many millennials are at the stage of life where people traditionally settle into a career, buy a house, and start a family. However, the way millennials look at money, the financial tools and products they need, and their view of what the present and future holds couldn't be more different than previous generations.

Millennials’ faith in big banks and financial institutions is low.  Rent and real estate is more expensive than ever, but their wages haven't gone up commensurately. Working a second job or side hustle is the norm. They've come of age in a world very different than the one their parents grew up in, and many of them have little use for the financial products designed for a bygone era.

Banks and card companies are rushing to meet millennials where they're at, offering money management solutions that take into account their financial priorities, their expectations regarding how technology fits into their lives, and the ways they spend money.

Millennials and money: What's new?

One of the biggest generational gaps we see is in the way that different generations handle money. From the frugal thriftiness of the Greatest Generation to the excesses of the 80s and the everything in-between, how money is viewed and managed is shaped by different societal factors.

What is shaping attitudes towards money in with Millennials?

Millennials have more student loan debt. The cost of higher education has risen more than nearly any other common life expense over the past several decades. Even though millennials are now well past the age when people typically finish college, the average student loan debt balance for millennials is over $38,000.

It's harder for millennials to find jobs that pay well. While the number of jobs might not seem all that different than it was 40 years ago, careers are much harder to come by, especially careers that can support the lifestyles that past generations had (homes, cars, retirement, etc).

Millennials save more money. Millennials on average are saving more of their money than previous generations. Some of this may be due to concerns about unemployment, especially since they've already experienced two of the largest economic crashes in history within their lifetimes. Another factor is concerns about retirement. 39% of millennials worry they won't ever be able to retire. Because of that, most millennials started saving for retirement in their early 20s, and put away more for retirement on average than previous generations.

Millennials are more interested in technology. Millennials are not only comfortable with digital banking and online investing or other tools, they expect them. If a given financial service can't be accessed through a smartphone, it's much less likely to be adopted by this generation.

Millennials have different views about credit cards. When it comes to credit cards, millennials are more financially savvy than previous generations, preferring cards with no fees and low interest rates over cards that offer flashy rewards. They're also more wary of debt, and more aware of the advantages of paying their credit card balance in full each month.

Millennials are more educated about the financial services they use. Millennials have had access to the internet for most or all of their adult lives, and are therefore accustomed to looking up information online about anything they find confusing. This means that millennials know more about financial products they use, but not about ones they don't. For example, millennials with investments will know more about investing than most, but those without them might not know much at all.

The key takeaways here are that millennials earn less, save more, and are more informed than previous generations. Millennials are using digital technology more and more for things like payments and money management. That means online banking is almost universal, but it also means millennials are moving away from things like cash towards digital payments and finances.

Why the big shift from cash to digital payments?

One thing millennials have clearly demonstrated is that they would prefer not to bother with cash. Even for small reimbursements and exchanges among friends, their preference is to use peer-to-peer transaction apps like Venmo. A digital ledger means never needing change for a $20 or arguing with your friends about whether or not you remembered to pay them back the five dollars they spotted you a week ago. While cash may be the first payment method to go, plastic could be next.  

Mobile payments from digital wallets stored in smartphones are making rapid gains in use and in popularity, especially in massive Asian markets, like China and India. In these parts of the world, where credit and debit cards never really took hold, consumers are bypassing them entirely and making the leap from cash straight to digital payment methods.

When you can buy steamed buns from a street vendor simply by scanning a QR code with the device that never leaves your side, why bother worrying about carrying cards around?

Mobile payments haven't yet hit saturation levels in western economies, but forecasters expect that to change in the years ahead. Millennials have already been early adopters of this technology, partially due to greater comfort with technology in general. Millennials also have fewer security concerns about mobile payments, perhaps in part due to their greater tendency to search online for such information.

What are the hubs for millennial money?

For many millennials, organizing, understanding, and accessing their finances means wrangling a wide array of disparate apps. They might use a proprietary app from their bank to check their balances, Mint to budget and plan, Venmo to send money to friends and family members, one digital wallet app for general purchases, a Target app for shopping at Target, various apps to track savings and investments, and so on. Keeping track of it all can be overwhelming.

Financial tech companies are looking to create integrated platforms that can serve as a central hub where consumers can manage, save, budget, and spend their money.  

Assemble, by MasterCard, is one such product. It's designed specifically with millennials in mind and aimed right at the sweet spot between technological versatility and ease of use (two things millennials are known to appreciate).

Assemble is a white-label product: A toolkit that banks, credit unions, and other card issuing companies can rebrand and customize to suit the particular needs of their customer base. The platform allows users to track, budget, and save their money.

It can also silo funds into different physical and virtual prepaid Mastercard accounts that can either be used as regular cards or stored in a digital wallet. For example, a user might create a budget that leaves a certain amount left over for discretionary spending. Those funds could then be loaded into a virtual prepaid card. The user can make payments with that card and never have to worry that they're dipping into their savings or funds reserved for bills or other necessary expenses.

Investing in the economy of the future

Courting millennials is going to be a high-stakes game for financial companies in the years to come, and the ones that earn their loyalty are poised to reap huge rewards. Millennials have grown up with a keen awareness of the fragility of economies, the gulf between the rise in cost-of-living expenses and the stagnation of their wages, and the dollar-stretching value of smart and proactive budgeting. They've also spent their formative years surrounded by examples of how technology can transform outmoded systems and empower people.

In no small way, future prosperity depends on providing millennials, and the teens following in their generational footsteps, the tools and resources they need to save, spend, shop, invest, and grow as economic citizens. Companies who are attentive to the things millennials want and need, as the decision-makers of the financial world, are sure to see the investment in this generation pay off mightily in the years to come.

FAQ

What percentage of millennials have student loan debt?

Thanks for following the Chargeback Gurus blog. Feel free to submit topic suggestions, questions or requests for advice to: win@chargebackgurus.com