The Stress of Millennial Money Management
This pandemic has wreaked havoc on the American economy. With unemployment at record levels and no end to the pandemic in sight, one might expect the consumer to be feeling the stress financially. Research from the Pew Research Center shows millennials have been hit particularly hard, as they are overrepresented in industries like hospitality and retail, and they lack the net worth to ride out the lack of income.
Numerous studies have shown that Americans in their 20s and 30s have less wealth than older generations did at the same point in their lives. Despite that, millennials are more likely than other generations to say they are financially knowledgeable. According to the Raddon Research Insights Study, Financial Health: Stress and Solutions in a Pandemic Age, 51 percent of millennials believe they are very or extremely knowledgeable, compared to 43 percent for the average American.
When asked, most millennials said they believe they are financially healthy; 52 percent of millennials said that they are either very or extremely healthy financially, while only 13 percent said they are not very or not at all healthy financially.
Those percentages would seem terrific at first blush. Yet when we dig deeper, we see a different reality.
Elusive Definition of Financial Stress
Consumers seem to say they are fine financially when they seem to be hiding a significant degree of financial stress. The chart below details how many consumers agree with statements regarding how their financial stress might be manifesting. A majority of consumers worry about an unexpected expense. Financial stress is affecting a significant number of consumers’ exercise schedules, eating habits and anxiety levels about taking care of their families.
The gaps are far more evident when looking at the generational breakdown in the below chart, which shows that 48 percent of millennials somewhat or strongly agree that they work extra jobs or hours to make ends meet. Only 15 percent of baby boomers say the same. Eating healthily and worrying about taking care of family show similar gaps.
Gen X displays similar levels to millennials regarding concern about the toll of financial stress, but the data reveals a clear generational divide. Income seems less important as lower- and higher-income millennials show similar levels of stress to lower- and higher-income boomers.
To examine this further, we segmented all respondents based on how strongly they agreed with each of the statements in Figure 1 and created three segments (very stressed, moderately stressed and not stressed). Respectively, 46 percent of millennials and 43 percent of Gen X are very stressed, while only 18 percent of baby boomers are very stressed. On the other hand, 46 percent of baby boomers are not stressed at all. The younger three segments are all far more stressed than their older counterparts.
Power of Financial Literacy
Given this knowledge of how stress is impacting consumers, what can financial institutions do to help?
Beyond providing technology to aid in budgeting, there are other meaningful things financial institutions can do to help offset the stress accountholders are experiencing.
For example, a slight majority of Americans believe their primary financial institution advocates for their financial well-being. To reinforce that idea, some financial institutions offer financial education programs. In 2017, we found that only 38 percent of consumers found this sort of program very or extremely valuable. But in 2020, during the pandemic, nearly half (49 percent) reported the programs have a high degree of value.
While younger consumers have historically found some value in these programs, the intensity has increased. In 2017, 15 percent of millennials found this sort of program extremely valuable. Now that percentage is at 32 percent.
More importantly for banks and credit unions, 57 percent of millennials say they would bring more business to their primary financial institution if it offered literacy programs. Simply providing a webinar or two will not be enough for consumers, however. Only 27 percent of consumers would like to see their institution offer webinars. Instead, they are looking for apps to provide budgeting help (47 percent), online blogs to help them prepare for financial milestones (43 percent) and financial planners (41 percent).
As COVID-19 takes its toll on all of us in various ways, the younger generations appear to be bearing the brunt of financial stress. Banks and credit unions can help alleviate that stress, perhaps building lifelong customers or members in the process.
Learn more about Raddon Research Insights.