Gen Y Needs Your Financial Institution…But Without the Institution Part

 Author: Lee Wetherington, LWetherington@profitstars.com

It sucks to be young.  Fifty years ago, the old were the poorest age group in America. Today that distinction belongs to Gen Y.

According to the Pew Research Center, Millennials (18- to 33- year-olds) are more financially strapped than previous generations: 

“Millennials are the first in the modern era to have higher levels of student loan debt, poverty and unemployment, and lower levels of wealth and personal income than their two immediate predecessor generations had at the same age.” (Pew Research)

It gets worse.

“Today’s young also have the unhappy distinction of being the first generation in modern history to have a lower standard of living than their parents’ generation had at the same stage of the life cycle. Despite collecting more college diplomas than any generation in history, Millennials lag behind their same-aged counterparts of yesteryear on virtually all key indicators of economic well-being…” (Pew Research)

But here’s the kicker.

"Yet, they are extremely confident about their financial future. More than eight-in-ten say they currently have enough money to lead the lives they want or expect to in the future.” (Pew Research)

Did you get that? They are still optimistic. Even though half of them never expect to receive a dime from Social Security. Even though they experience the highest rate of fraud of any age group. Even though their (mis)fortunes have led them to be less trusting of others in general. They still have their heads up. That said, there are three things financial institutions should take away from the latest numbers on Gen Y.

First, they need your help. In fact, if you don’t help them, they will forestall consumption of your products and services. Until they reach “solid economic footing,” (e.g., dig out of student debt) they won’t be (and aren’t currently) getting married, buying houses, or having children—all of those milestones underpinned by the loans and personal financial services that financial institutions offer. Moreover, without your help, their trust in you will wane, and their resilient optimism about having “enough money to lead the lives they want” means they will learn to live with less and reevaluate the need and role of traditional finance.

Second, Millennials are less connected to traditional institutions than any previous generation. Half of Millennials eschew political parties, and 29% are not affiliated with any religion—Pew calls it “the highest levels of political and religious disaffiliation recorded for any generation in the last quarter-century.” So if Gen Y is moving away from political institutions and religious institutions, what about financial institutions?

Third, for financial institutions to escape “disaffiliation” by Gen Y, they must offer the help Millennials need most now: better ways to save, smarter ways to spend, and easier ways to track their money in real time (think mobile PFM and smartwatch apps).

Amazon recently announced the launch of its Fire Phone, which is little more than a hardware vehicle for FireFly, an app that can recognize any real-world product and in one click (bypassing the Fire Phone’s lock screen) take the user to that product’s page on Amazon—all without the context of the user’s account balances or true ability to fund the purchase. Instant retail gratification. Just the kind of blind, amygdala-driven consumption Gen Y doesn’t need and can’t afford.

Only financial institutions can provide real-time funds-availability context to the shopping experience. Amazon just wants to make the sale. That difference is vital.

If financial institutions want to avoid mass “disaffiliation” by Gen Y, they must offer material help where Gen Y needs it most—better, easier ways to make the most of what they have. By offering that help, financial institutions will bolster their trust among the young, secure their collective futures, and catalyze the recovery of a generation on the edge.