How Millennials View Banking

In the first of three articles, we ask how the Great Recession, income inequality and other factors have shaped millennials’ approach to money … and what that might mean for community banks

By Kelly Pike

Millennials have gotten a bum rap.
They’ve been called “entitled” by Gen Xers, who have perhaps forgotten they were once labeled “apathetic,” and baby boomers, who were once scorned as “narcissistic.” They’ve been called self-obsessed, never mind that most young people typically are. And they’ve been viewed as mooches for living at home longer than any generation since the 1940s, even as the economy has recovered.

But there’s more to America’s largest generation, population
76 million and counting. Today’s millennials, now roughly between the ages of 20 and 36, are mostly grown up. They make up 31 percent of the U.S. adult population and 34 percent of the workforce, according to Pew Research. They are more culturally diverse and more educated than any previous generation. And when it comes to money, they are facing a lot of challenges.

It starts with their paychecks. Today, a college graduate 25 to 34 years old earns about the same as a high school graduate did in 1989—a 20 percent decline in wages, according to a 2017 study by Young Invincibles, an advocacy organization for young people. Combined with record-high student loan debt averaging about $21,000 for under-30s, according to the Federal Reserve, millennials have half the net worth boomers had at the same age, despite much higher retirement savings.

Millennials’ share of the U.S. adult population

Student loan debt has left an indelible mark, contributing to the well-documented trend of putting off large purchases or starting a family. Just 35 percent of households under age 35 own homes, compared with 41 percent in 1982, according to Pew. The difference is particularly stark among those with a high school degree or less, according to Young Invincibles, down 22 percent since 1989.

Meanwhile, credit card debt among Americans under 35 is at its lowest levels since 1989, a 2016 New York Times analysis of Federal Reserve data found. Some millennials have turned to debit cards, while others, like Lizzy Isaacs, a 25-year-old loan assistant at $3.2 billion-asset FirstBank in Franklin, Tenn., use a credit card to accrue travel points and pay it in full each month.

“This generation is more conservative and risk averse,” says demographer Neil Howe, who, along with William Strauss, coined the term “millennial” in 1991. “They don’t want to get into debt.”

What does millennial mean?

Three millennial community bankers define a generation

“For me personally, to be a millennial is just proving ourselves and erasing the stereotypes… Millennials are great! We’re awesome! We’re just a more open, friendly group of people willing to change for the better.”
—Raynell Lenz, credit analyst, 24,
the Dime Bank, Honesdale, Pa.

Most times, we’re trying to figure out things in a world very different from what our parents were raised in… Our commitment to faith, family and community is still really important. We just think about it a little differently.”
—Lizzy Isaacs, loan assistant, 25,
FirstBank, Franklin, Tenn.

“In all honesty, it’s just a definitional viewpoint: the group of people born in the early to mid-’80s to mid- to late ’90s. It doesn’t have a huge impact on me … It just doesn’t have a lot of punch or impact on how I view my generation.”
—Ryan Witt, agricultural loan officer, 31,
Royal Bank, Mauston, Wis.

That doesn’t mean they aren’t materialistic. Americans entering college have increasingly reported that being “very well off financially” is an important life goal. It began with 45 percent of boomers in the 1970s, rose to 71 percent of Gen Xers and hit 75 percent with millennials, according to Jean Twenge, a psychology professor at San Diego State University and author of Generation Me.

Two waves
Howe divides millennials into first and second waves, marked by the financial crisis. Second-wave millennials have been raised more protectively and were exposed to financial stress much earlier in life. They also come across as less materialistic in surveys, with fewer aspiring to own vacation homes or new cars, Twenge says.

The Great Recession’s impact on millennials may be relatively small compared with more linear trends such as income inequality, says Twenge. That, combined with a cultural shift focusing more on the individual self and less on social rules, has played a greater role in millennial financial psychology.

“They grow up hearing that the world is competitive,” she says. “They need to go to college and get a good job. There’s a general feeling that you make it or you don’t.”

The economy was booming when Isaacs was in seventh grade, and she had many classmates whose parents bought them designer handbags. After the recession hit, those same girls had to find after-school employment.

“A lot of us had to get jobs and couldn’t buy that stuff that we could before,” Isaacs recalls of 2008, when she was 16 and her parents “lost a lot of money.” “We started shopping at thrift stores and trading.”

Ryan Witt, a 31-year-old agricultural loan officer at $356 million-asset Royal Bank in Hillsboro, Wis., had just graduated college and started as a part-time bank loan officer in 2008 when the downturn hit. Many of his peers had trouble finding a job or got laid off as the low man on the totem pole. His job at the bank reminded him of stories from 1988, when high interest rates, a drought and low crop prices squeezed his family’s dairy farm.

“I give credit to my parents,” he says of the budget-conscious way he and his wife now manage their finances and avoid debt.

Optimism remains a cardinal trait of millennials, says Twenge. Critics may claim parents coddled millennials, but being told they could be anything they wanted made them confident with high expectations for their jobs, education and material attainment.

“We definitely see the brighter side of things,” says Raynell Lenz, a 24-year-old credit analyst at the Dime Bank, a $638 million-asset community bank in Honesdale, Pa. “Some say we’re not being realistic, but having a positive attitude does wonders for every position you’re in.”

Challenges for banks
That’s not to say the crisis didn’t have an impact. It further eroded confidence in banks and institutions across all generations. Pair that with the children of immigrants and the underbanked, who were raised using prepaid cards, remittances and cash, and attachments to banks are at record lows. “Millennials think banks are a dangerous place,” says Howe. “They want to reel you in, try to seduce you into borrowing more.”

Despite their reservations, 59 percent have a bank account, 19 percent have both a bank and credit union account, and 11 percent have a credit union account, according to a survey by CCG Catalyst, a bank strategy consulting firm based in Phoenix, Ariz. Almost half still use a checkbook.

of millennials have
a bank account

Millennials are also optimistic about saving. A recent survey by Bankrate found that 47 percent of Americans ages 18 to 29 would use savings to pay for an unexpected $500 or $1,000 expense, the highest of any group. They’re also stashing an average of 7.5 percent of their income into retirement savings, according to Fidelity.

Of course, trends are built on generalities, and millennials are more than data. They are individuals with wide-ranging cultural, economic and personal perspectives. Meanwhile, critics have chided researchers for over-focusing on affluent millennials. Just as hippies represented only a fraction of boomers, hipsters are but one memorable segment of a larger diaspora.

In the end, perhaps their parents are right. Maybe millennials are special snowflakes after all.

Coming up: Generation Z

Born in the mid- to late 1990s and after, the oldest members of Generation Z, or “iGen,” are already in college. Dubbed post-millennials, Homeland Generation or iGeneration, these Americans grew up in a post-9/11 world and their formative years coincided with the Great Recession. Most can’t remember a world before smartphones and social media.

Destined to outnumber millennials, Gen Z is even more ethnically diverse, with about half the population a member of a racial or ethnic minority, the Census Bureau estimates. Living through the economic downturn and terrorism, this generation tends to be practical yet frightened, according to author Jean Twenge, whose book iGen comes out this August.

“They have their feet on the ground a little more,” she says. “They seem to recognize that they are going to have to work very hard, but they are anxious about making it.”

A Harvard Business Review article backs up this assessment, noting that these youngsters have become entrepreneurial in response to a much smaller pool of jobs available to teens. While they are on a trajectory to carry on millennials’ materialism, they also face a mental health crisis, with the rate of major depression and suicide skyrocketing over the past five years, Twenge says.

The world that was … and is

Some of the forces that have shaped American millennials

October 1987 Black Monday:
Dow Jones Industrial Average falls by 22.61%

Early 1990s recession
(July 1990–March 1991)

August 1990 Oil price shock in response to Iraq’s invasion of Kuwait

Dot-com bubble (1995–2001)

December 1998 PayPal is founded

Early 2000s recession
(March–November 2001)

September 2001 Terrorist attack on the World Trade Center and the Pentagon

February 2004 Facebook founded

Great Recession (December 2007–June 2009)

June 2007 iPhone debuts

August 2007 Lehman Brothers closes its subprime lender, BMC Mortgage

September 2008 Lehman Brothers collapses; Dow Jones closes down more than 500 points

Digital natives

This generation has grown up with the internet

Millennials are considered the first digital natives. The internet entered the mainstream when the oldest millennials were in middle school, and iPods were invented when they were in college. The youngest millennials probably can’t remember a world before cellphones—even if they were flip phones.

“We are the first generation to grow up with the world at our fingertips and 24/7 access,” says 31-year-old community banker Ryan Witt. “We were there at the beginning, and we’ve seen it through. That’s what makes us unique.”

Growing up along with technology has shaped millennials’ worldview and expectations. They expect interaction to be personal and convenient—and convenient means online, says author Jean Twenge.

“Millennials live their whole lives on their phones,” she says. “Boomer and Gen Xers like the convenience as well, but it’s not as taken for granted and second nature.”

These digital natives are plugged in and expect their finances to be too. Since 87 percent have mobile phones, they are among the quickest adopters of mobile banking and apps. FIS found they are three times more likely than baby boomers to access their accounts through their mobile phones and 30 percent less likely to visit a bank branch.

They are also among the most open to nonbank fintech firms, everything from crowdfunding sites like GoFundMe to person-to-person payments like Venmo. Their vision of online social connectivity helps them embrace ideas like the sharing economy, including car-sharing and renting luxury goods.

And while they are known for how close they are with their families, that doesn’t necessarily mean they bank in the same way. Community banker Lizzy Isaacs, 25, says her parents were puzzled to learn she doesn’t bother to balance a checkbook like they do. She relies on an app on her phone.

November 2008 Barack Obama is the first African-American to be elected U.S. president

October 2009 U.S. unemployment rate hits its post-crash peak
of 10.2%

September 2011 The first Occupy Wall Street protest is held in New York City

July 2016 Hillary Clinton is the first woman to be a major political party presidential nominee

January 2017 U.S. unemployment rate is 4.8%

Kelly Pike is a freelance writer in Virginia.

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