What would tax season be without some sobering news about the saving and spending habits of young people in their twenties today? Recent survey results from Think Finance show that Millennials are turning to alternative financial services in droves. And we’re not talking about credit unions or cooperatives.
Think Finance surveyed 640 underbanked Millennials and have discovered that the reliance on convenient and immediate financial products over institutionally guaranteed loans or credit cards is both widespread and independent of economic conditions. Half of the highest and lowest income groups had used prepaid debit cards in the past year. 34% of respondents earning less than $ 25,000 had used check cashing services in the past year, while 29% of those earning between $ 50 and $ 74.9 had done the same.
At first glance, alternative financial services seem to fit perfectly with the stereotypical millennial mindset that values convenience and immediate reward. When it comes to instant gratification, payday loans to do does the trick well. The appeal of these products, however, runs a little deeper than straightforward answers about rights and lack of financial literacy. After experiencing September 11, multiple wars, the Great Recession, and industry bailouts during their formative years, Millennials have become conservative about their money and skeptical about the options available to them for investing it. and save it. Research UBS Investor Watch found that Millennial Investors have a risk tolerance comparable to their grandparents who lived through the Depression. 34% of Millennials surveyed described themselves as at least somewhat conservative about their approach to managing their money and they keep 52% of their wealth in good ol ‘cash. Further research from Microsoft and KRC Research has found that cynicism about the financial system runs deep in millennials. As reported by the Globe and Mail:
“Of those polled, 67% said they were wary of stocks due to the weak economy, and 82% feared more financial institutions might go bankrupt. Fifty-one percent said that they are unlikely to invest in 401 (k) plans or other retirement accounts. “
For many Millennials, money management is both a source of anxiety – they fear having enough funds for retirement, being able to care for their parents in old age, and avoiding financial mistakes – and a sign of adulthood. The Hartford found that 50% of Millennials in their nationwide survey identified ‘making financial decisions’ as a mark of reaching adulthood and 26% felt their paycheck was their greatest asset.
In light of the distrust of traditional financial instruments and the pragmatism of not digging a hole deeper than the one they already find themselves in due to student loan debt and a weak labor market , prepaid debit cards – can’t spend more than you charge them – make some kind of tax-savvy sense.
To learn more about my work. Contact me.