Millennials (1977-1995) and Generation Z (1996 to 2015) will represent nearly two-thirds of the world population by 2019. These two generations have hardly lived without computers and smartphones and have heralded the wide-spread use of tablets, smart phones, social media, and texting. They have also brought forth increasing consumer demand for security, personalization, and self-service.
And, thanks in large part to the 2008 recession, many in these generations have been directly affected by or seen the results of poor financial management. Over eighty percent (81%) of those 16 to 25 witnessed their parents experience financial hardship. Many older Millennials saw the job market stutter just as they were stepping out into the world. This experience has had a major impact on both the Millennials and Gen Z, changing their behaviors and shaking long-held beliefs regarding financial stability.
The results? Gen Z (22 and under) is focused on saving money for the future with seventy-seven percent (77%) already earning their own spending money through freelance work, part time jobs, or earned allowance, according to The Center for Generational Kinetics. They research their purchases and consider not only the quality of their future education but the costs involved. The majority of Gen Z plans to work through college to earn experience and offset debt.
Millennials are already well into their careers – taking over as the primary generation within the US labor force as of 2017, according to Pew Research Center. However, while they are reaching higher levels of spending and investment power a 2017 study from Merrill Lynch shows they are also delaying major milestones such as purchasing real estate and starting a family.
The key motivation for both Millennial and Gen Z behavior is simple – the desire for financial security. For some, it is a reaction to the struggle they witnessed through their parents or friends. For others, it is a response to their own financial difficulties upon entering adulthood. The result is the same…they want to be able to ensure stability for themselves and their families now and into the future.
The problem is they don’t really know how.
Despite a desire for financial security, many in these generations have little financial knowledge. A study of current university students from EVERFI showed less than a quarter (14%) knew the recommended amount for an emergency fund. Less than half (29%) knew to be cautious about closing credit card accounts. And only forty-seven percent (47%) knew that net worth is calculated as assets minus liabilities. Similarly, a study from PWC reported only twenty-four percent (24%) of Millennials demonstrate basic financial literacy and thirty-four percent (34%) are unsatisfied with their current financial situation.
The good news is they want to learn.
According to a report from TransUnion, sixty-five percent (65%) of Gen Z reported feeling more loyal to lenders that offer tools to help see and understand credit scores. According to a survey by LendingTree eighty-eight percent (88%) of Millennials believe a financial literacy course should be required before high school graduation.
Which is exactly why these generations display greater loyalty to bank, credit union, and financial brands that help them more easily manage their finances. And with the growing number of financial options out there, it just might be time for your institution to up its game on financial wellness.