Capital Markets Corporate

November 30, 2018

MILLENNIALS: FINANCIAL SHORT-TERMISTS OR SECURITY SEEKERS?

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Avocados, boozy brunches, Instagram and an impulsive attitude to life; all the supposed hallmarks of the millennial generation. This age group has been defined by its blatant disregard for financial security and forward planning in favour of experience chasing, documenting every moment to secure likes on social media and seeking peer validation as well as jealousy. But do these perceptions really match up to reality – particularly when it comes to millennials’ finances?

In order to understand where reality has become myth, we’ve launched a new report benchmarking millennials’ actions and attitudes to financial services against their elders.

The findings suggest that far from being short-termists – the widely touted view of this generation – millennials prioritise long-term financial health and security over more immediate life milestones.

Though millennials are often accused of spending on holidays rather than saving, travelling is actually relatively far down their list of most important life milestones (and interestingly, both Gen X and baby boomers are more likely to prioritise this).

Instead, millennials’ top life milestones are becoming financially independent – perhaps a side-effect of this generation being seemingly tethered to the Bank of Mum and Dad to get by – becoming debt-free and buying their first home. Getting married and having children fall into fourth and fifth place respectively.

This seems to signify a generation who feel obliged to get their financial house in order before settling down and starting a family. This – coupled with the fact that when asked about financial success in the next five years, they point to being in stable full-time employment and having money set aside for a rainy day – demonstrates millennials are far from being the short-sighted spenders they are often painted out to be.

But if millennials are so conscientious, why are they facing such financial difficulties? For example, Financial Conduct Authority (FCA) data suggests adults aged 25-34 have the highest level of over-indebtedness than any other generation and the greatest ownership of high-cost loans.

The answer is likely to lie partly behind economic factors, such as this generation being disproportionately impacted by the 2007/8 financial crisis. If short-termism among millennials exists, it is generally not due to a failure to care about events far in the future, but is instead necessitated by more immediate and legitimate financial concerns like coping with poor wage growth,  expensive living costs and sky-high housing and education fees.

Financial services firms targeting millennial audiences should therefore keep this in mind when developing communications strategies. Despite the need to save for the long-term, when engaging with millennials businesses need to demonstrate an understanding of the competing priorities this audience faces.

The life experiences and financial challenges of millennials in their 20s and 30s are also often worlds apart, with younger millennials fresh from university tackling very difficult financial priorities to those in their 30s. Instead of treating millennials as one homogenous target audience, businesses should consider those in their 20s and 30s as distinct subsets and tailor their communications accordingly.

Those in the millennial age group typically make life-changing financial and personal decisions over a short period of time. Businesses must ensure they are positioning themselves as a partner of choice, playing an active role in helping their customers navigate this extremely exciting but daunting period of their financial lives.

A helpful but empathetic tone will help organisations communicate successfully to an age group that represents the next generation of consumers and is critical to future business growth.

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