Financial stability. Depending on who you ask, the perception of this concept is quite different. Baby boomers will likely tell you it’s about the destination. Saving for the down payment on a house, or paying for a vacation in full that took years to save for. Ask a millennial or generation Z and the response could be quite different.
For many, success now is about pleasure and enjoying the ride. The definition of success and financial stability is changing and financial institutions need to evolve to serve their younger members.
But this idea of enjoy now, pay later is taking its toll. A report from credit reporting agency TransUnion from August 2019 indicates that a spike in borrowing resulted in millennials overtaking boomers in total debt holdings. But why?
Certainly education plays a role. More millennials and GenZ’ers are pursuing post-secondary education, taking on student debt to be able to fund their studies. But to get out of debt after school is over, it means there needs to be a high-paying job at the end of the university rainbow. And that’s not always the case.
Another factor (an epidemic, really) – limited financial knowledge. For many, “banking” means going to mom and dad’s bank, opening a chequing account and spending those dolla-dolla bills. But what’s lacking is the knowledge of how that account works or other basic banking concepts, let alone debt and repayment.
So how do these younger generations break free of the debt cycle that can potentially cripple their future? Connect First Credit Union is working hard on the answer.
“At Connect First, we have seen an increase in debt loads for Millennials,” says Shelley Vandenberg, President of First Calgary Financial, a division of Connect First Credit Union. “While this generation tends to have higher salaries than previous generations, their cost of living has also increased.”
To help, First Calgary is focusing on financial literacy and transparency to help millennials (as they do with other members) get out of debt. The aim? The right tools. “Millennials have grown up with technology at their fingertips and prefer to receive information in the fastest and most convenient methods,” Shelley has observed. “To improve financial literacy, we leverage technology to reach millennials and share tools that can help manage their debt and reach their financial goals, like mobile and online banking, budget calculators and more.”
And while it may seem basic, focusing on general financial matters can lay the foundation stronger financial stability later in life. Shelley and the First Calgary team focus on four priorities that pose the greatest challenges to millennials when it comes to their financial literacy education:
- How to create a budget and stay on a budget (cash flow management);
- How to identify and set realistic expectations when making large purchases, such as a home, so they are more prepared to realistically understand what they can buy and where they can buy;
- Understanding which debts they should start paying down first; and
- Helping them identify and prioritize their needs versus wants.
When it comes to more complex matters like discussions around qualifying for a mortgage or investments, Shelley has found millennials prefer face-to-face interaction with personal bankers. While saying this generation is tech savvy is an understatement, they still need the personal connection to help them make solid financial decisions, enforcing a two-pronged approach.
Getting them through the proverbial door is another challenge. But First Calgary is working on that, too. “We offer free chequing accounts or switch them to a low rate credit card,” says Shelley. “And we provide savings options to maximize the amount they can put away for a down payment on their first home.”
It comes down to communicating the benefits of credit unions and how personal needs can be addressed. Meet millennials where they are – in real life and in communications style. Don’t be afraid to engage them on social media, their communications tool of choice.
While millennials are the most unique generation to date when it comes to their financial needs, they’re definitely a nut that can be cracked. For Shelley and her First Calgary team, the goal is simple.
“To help millennials with their financial goals, we aim to truly understand them first. We emphasize the specific products and services that match millennial needs versus trying to get them to fit one solution. Our goal is to address their challenges personally with a ‘we-can-help-you’ approach.” This is, after all, what credit unions do best.