January 11, 2019
Knowledge is King: How much do millennials really know about their finances?Contact
By Amy Boekstein, Account Executive, Financial Services
Knowledge and confidence in personal finance – from saving, to taking out a mortgage, to investing in the stock market – can have a big impact on the balance of your bank account.
In light of this, many reports have sought to portray the millennial generation – which can be loosely defined as the generation of adults aged 18-37 – as flippant about their knowledge of personal finance and risky with their money.
Demand for financial education
So what does the data show?
Research by Instinctif Partners shows that contrary to commonly held beliefs, 85% of 18-37s are interested in improving their financial knowledge. And compared with other age groups, the current millennial group is also the generation that is the most open to financial education.
According to this research, the majority of millennials who said they would like to improve their financial knowledge, also cited financial services providers as the most popular choice to provide this education. Financial services firms should use this opportunity to step up to fill this personal finance knowledge gap.
It would therefore be wise for financial services firms to convey that they are available to provide this education clearly in their marketing and communications materials. This would bolster their image as a company interested in helping its customers make wise financial choices.
What’s more, it would allow these firms to position themselves as the go-to destination for millennials wishing to make significant financial decisions. These customers will become increasingly valuable, as many are making some of life’s most expensive decisions, be it buying a house for the first time, getting married or having children.
Risky or risk-averse?
This research also looked at millennials corresponding attitudes to taking risks when it comes to their finances. It has been a commonly held perception that millennials are careless and prepared to take risks with their finances, including paying for holidays and the pursuit of material goods. However, our findings debunk this myth and show that just one in three (33%) millennials are prepared to take risks with their money.
While this generation is much more risk-averse, the research also found that they are happier to take chances with smaller sums of money. Here lies the opportunity for emerging fintech companies who have apps and features which cater to this trend. Many firms are already stepping up, such as Moneybox – a firm which rounds up purchases you make to the nearest pound and invests these savings in the stock market.
The research also showed that millennials are much more likely to buy a lottery ticket (38%) or to place a bet on a sporting event (21%) than they are to invest it in a stocks and shares ISA (12%) or traditional investments (12%). While they may know their way around a sports betting app, the majority of millennials still cite themselves as not very confident when it comes to more complex money matters like investing.
Firms operating in the investment space therefore face the challenge of trying to communicate the long-term benefits of investing and the associated risks, convincing millennials that this is a risk worth taking.
The road ahead
Efforts to improve financial education at the same time should help steer this conversation on risk and attitudes towards investment in the right direction – but for the time being, firms should be mindful of this nuance and avoid jargon at all costs.
By debunking these pre-conceived perceptions of millennials, financial services firms will have a much clearer understanding of a generation that has been clouded by confusing and conflicting reports. Far from being flippant, this generation is clued up. They have also shown appetite to learn even more about how to make responsible finance decisions.
If we know that knowledge and confidence in finance can have a big impact on the balance of your bank account – then it is in the interests of financial services firms to step up to fill this knowledge gap. Doing so should benefit both customers and financial services firms alike.
You can view and download the full report Who’s caught the millennial bug? here