By Tom White, CEO & Co-Founder, iQuantifi
Graduation season has come and gone, thrusting thousands of wide-eyed graduates into the real world in search of their first job. In addition to earning a salary replete with benefits, graduation marks the first time that many millennials will need to set a budget, create short and long-term financial goals and set financial priorities. We’re bombarded by media reports that the millennial generation has an aversion to planning and saving money, but data shows otherwise. According to our first annual Millennial Money Mindset Survey, nearly three quarters of respondents (72%) have set financial goals, yet only 20% actually have a plan in place to achieve them. The real problem is that millennials are turning to friends and family for advice. That would be fine if the advice their friends and family offer is sound and rooted in time-tested financial planning principles. Too often it is not.
This translates to good news for banks and financial institutions because it offers a rare opportunity to seize the millennial share of the market. It’s imperative for banks and financial institutions to assist recent graduates in setting goals, laying the groundwork for sound financial habits. By helping an under-marketed, oft-ignored generation begin their financial futures, you’ll be setting them up to be lifelong banking partners down the road. For decades, banks have shown strength by having a branch on every corner, vast ATM networks and by relying on convenience as key selling points to customers. With the rise of technology, the playing field has begun to change.
According to U.S. census data, millennials now outnumber baby boomers. This creates a perfect storm for banks to tap into the growing power of the millennial generation, the future wealth generators of the U.S. Here are five ways to help recent graduates start their financial careers off positively, positioning them to be lifelong customers of your institution while garnering coveted millennial generation market share.
1) Set goals: Assisting millennials with setting goals positions them to make smarter money choices later in life. Advise them to be sure that the goals they set have both a purpose and a timeframe to determine the most accurate account and strategy.
2) Automate finances: Advise clients to automate their finances, whether it’s paying bills, setting notifications when bills arrive or by paying themselves first via transfers to a savings account on payday. This takes the guesswork out of the equation and savings grow monthly.
3) Emergency savings: Encourage millennials to start with one month of savings (and to automate it) to guard against overdraft fees and unexpected expenses, gradually building to a cushion of six months worth of pay.
4) Retirement: Every little bit helps, so even if clients don’t feel they can’t contribute 10% of their salary to their 401(k) plan, be sure they at least contribute the minimum to capture their company match.
5) Know your credit: Preach the importance of the credit score, which is the first step to building good credit and leads to savings later on in the form of better loan rates (auto, mortgage, etc.). Offer examples over time of how someone with a good credit score saves versus someone with an average or poor score.