How Credit Unions are Engaging Millennials

Credit unions that help millennials manage high student loan debt and wage stagnation are better positioned to attract and keep them as members.

Offering online and mobile-friendly financial wellness education that is customized to each member’s current and future needs is especially important to serving this digital generation.

Millennials are the largest generation in the U.S. workforce, making their financial struggles and economic pressures a concern for everyone from financial institutions to political candidates to employers.

The Financial Struggles of Millennials

Millennials are struggling to pay bills, delaying having families and buying homes, and failing to save for retirement.

In most cases, they aren’t in this situation due to irresponsible spending, but instead  unfortunate timing:

Increasing college costs and student loan debt: According to the National Center for Education Statistics, the average cost of a college education in 2016 was $104,480--double the cost of the same degree in 1989 (adjusted for inflation).¹

Meanwhile, wages increased only $5,000 per year during the same period of time, reports the Federal Reserve Bank of St. Louis.²

Student loan debt reached an all-time high of $1.6 trillion last year, with the average college graduate leaving with a diploma--and $30,000 in loans.

The 2019 Poverty and Inequality Report from Stanford University indicates that in comparison to Generation X (born between 1965 and 1980), millennials (born between 1981 and 1996) take out more and larger student loans and default more frequently.³

The report attributes much of this to higher tuition and graduating into a post-recessionary economy.

Wage stagnation: Millennials earn an annual average of $35,592, which is 20 percent lower (when accounting for inflation) than Baby Boomers earned at that age, according to SmartAsset.

Whether renting or paying a mortgage, millennials are spending between 30 and 40 percent of their annual income on housing costs, according to data from the U.S. Bureau of Labor Statistics.⁴

Twenty percent of their annual income is going towards student loan debt, a TD Bank survey revealed.⁵ 

Several recent surveys show that millennials don’t have much left over after paying monthly expenses and debt:

• Only a third own stock, down 20 percent from 2001⁶
• Net worth is 20 percent lower than Baby Boomers⁷
• 55 percent have no retirement savings, according to MorningConsult⁸
• About 75 percent have less than $5,000 in a savings account and almost 50 percent live paycheck to paycheck⁹

Delaying Major Adult Milestones

About one-third of adults ages 18 to 29 and one-fifth of those ages 30 to 44 have student loan debt, according to the Pew Research Center.

Nearly half of millennials with credit card debt use their credit cards to cover daily expenses.

This student loan and credit card debt has led many millennials to put their lives on hold. An NBC News/GenForward poll¹⁰ found:

• 14 percent are choosing to remain single while they get their debt under control
• 16 percent are delaying starting a family
• 34 percent are renting rather than buying a home
• 31 percent are delaying saving for retirement

A recent Zillow report¹¹ and SmartAsset study¹² found:

• 76 percent of home buyers with student loan debt have a down payment of less than 20 percent, which often increases the interest rate.
• 31 percent of millennials want to own a home but aren’t currently saving for one.

This means millennials are not building wealth with property, which will impact their financial choices for decades to come.

Mental Health Issues

Studies show that financial stress can contribute to mental health issues. Blue Cross Blue Shield Health Index data shows that depression is on the rise among millennials, increasing 47 percent since 2013.¹³ 

Financial stress has been linked to post-traumatic stress disorder¹⁴, substance abuse disorder¹⁵, suicide and mental health disorders¹⁶, especially among millennials.

Being financially stressed impacts millennial employers:

• Gallup found that 30 percent of millennials experience significant burnout at work.¹⁷ 
• Because more than a third of millennials feel that their workplace contributes to their mental health issues, 50 percent have voluntarily left a job for mental health reasons.¹⁸

The cost of mental health issues to businesses is substantial. Presenteeism and absenteeism due to mental health conditions cost 217 million days per year--$16.8 billion annually in lost productivity, the MindShare Partners report found.

Financial Wellness Programs Can Help

In addition to helping your members create a budget and track expenses, financial wellness programs can:

• Explain student loan debt and the effects of forbearance and default and provide information on student loan consolidation
• Provide simulators to see how payment options affect debt
• Explain how to improve credit scores in order to get better rates for debt consolidation
• Teach the benefits of retirement savings and different investment options

To find the right financial wellness program, look for one that is:

• Customized and adaptable to each user’s age, financial situation, life stage, etc.
• Interactive, with features like video and gamification to increase engagement.
• Unbiased: The platform should not pressure users to buy a particular product or service.
• Recognized: Seek referrals, read reviews, etc.

1 - https://nces.ed.gov/fastfacts/

2 - https://fred.stlouisfed.org/series/MEHOINUSA672N

3 - https://inequality.stanford.edu/sites/default/files/Pathways_SOTU_2019_StudentDebt.pdf

4 - https://www.bls.gov/news.release/cesan.nr0.htm

5 - https://www.prnewswire.com/news-releases/td-bank-survey-finds-americans-spend-more-than-20-of-their-take-home-pay-on-student-loan-debt-impacting-their-long-term-financial-health-300898679.html

6 - https://news.gallup.com/poll/233699/young-americans-wary-investing-stocks.aspx

7 - https://www.pewsocialtrends.org/essay/millennial-life-how-young-adulthood-today-compares-with-prior-generations/

8 - https://morningconsult.com/wp-content/uploads/2019/10/190963_crosstabs_MONEY_Adults_v3_JB-1.pdf

9 - https://www.gobankingrates.com/banking/savings-account/best-savings-accounts/

10 - https://www.nbcnews.com/news/us-news/poll-majority-millennials-are-debt-hitting-pause-major-life-events-n862376

11 - https://www.zillow.com/report/2018/

12 - https://smartasset.com/mortgage/years-of-work-to-afford-a-down-payment-2019

13 - https://www.bcbs.com/the-health-of-america/articles/two-million-commercially-insured-americans-diagnosed-major-depression-not-seeking-treatment

14 - https://www.businesswire.com/news/home/20160420005504/en/Payoff-Study-Finds-1-4-Americans-1

15 - https://wellbeingtrust.org/wp-content/uploads/2019/06/TFAH-2019-YoundAdult-Pain-Brief-FnlRv.pdf

16 - https://www.businessinsider.com/millennials-mental-health-burnout-lonely-depressed-money-stress

17 - https://www.gallup.com/workplace/237377/millennials-burning.aspx

18 - https://mindsharepartners.lpages.co/mentalhealthatworkreport2019/