Millennials are constantly getting a bad rap for being financially irresponsible. I’m sure you’ve heard the accusations of how frivolous we are, or how we’re living lavishly off of our parents’ money. (Full disclosure — in some circles, I’m considered a millennial!). The industry and the media often paint the picture that because of our irresponsible habits, we can’t afford to buy houses and we’re riddled with debt. I’m here to play myth buster.
It’s true that we hold more debt than any previous generation. US consumer debt is at a record high at almost 20% of the GDP. Millennials hold $1.1 trillion of the $3.6 trillion the U.S. holds in consumer debt. But the reasons you may have heard about why we hold this debt are often not true.
Let me clarify. I’m not saying that all millennials are perfectly responsible angels. What I am saying is that our intentions for being financially responsible have not changed from the previous generation. Yet, the systems around us have changed for the worse. The reality is that some people in the education, technology and finance industries have acted irresponsibly, and we’ve been left to deal with the aftermath.
Let’s start with the education system. Millennials actually earn 20% less than baby boomers when they were in the same life stage as them, but millennials are still better educated than the previous generation. However, they have half the net worth. This is in large part due to student debt. In a survey that was conducted by the National Center for Education Statistics (NCES), 60% of those who sought postsecondary education had to take out a loan. On average, the loan was $30,000. 25% of people said they worked more than 1 job because of their loan, and more than 1/3 took undesirable jobs just to pay off their student debt. Average student debt at college graduation has increased 56% from 2004 to 2014.
We can go even further, and pinpoint for-profit colleges as the disproportionate cause of student debt. These colleges have been accused of making false promises to students that they’ll land lucrative jobs after graduation. Their fees are steep, their promises are shallow, and they leave students debt-ridden, underemployed or unemployed. The debt owed by students who attended for-profit colleges increased from $39 billion in 2000 to $229 billion in 2014. Although our generation has shown enthusiasm to learn, and the drive to find meaningful work, the education systems we interact with are too often focused on profit at any cost.
On top of this, companies in Silicon Valley hire on the brightest engineers to develop technology targeted at millennials. These technologies are many times designed to be as addicting as possible, so companies can maximize profits. Last year, a stat came out that millennials check our phones on average more than 150 times a day. Although we freely talk about how we’re personally to blame for this phenomena and how we might improve our own discipline, we should also be talking about the roles and responsibilities of companies in the “attention economy.” Companies are intentionally manipulating our behaviors, and sometimes framing their products as improvements to humanity when their effects on our brains are potentially net negative in the long term. This along with information overload are challenges the generation before us never had to deal with.
In the end, all of the pressure has led to a generation worried about their personal finances. A survey by Boston Research Technologies captured that millennials actually spend twice as long as Generation Xers and four times as long as baby boomers worrying about their personal finances at the office during an average work week.
That’s where FinTechs come in. It’s not surprising that Fintechs spend the majority of their time trying to capture the millennial market. They say they’re after us because we’re always on our phones. They also say we want convenience. These things may be true, but they don’t touch on the deeper reasons. I’d argue that the reason Fintechs are doing well in this market goes far beyond this, and has to do with the issues outlined around the two industries above. Traditional banks and financial advisors weren’t developing products and services that were meeting the complex needs of our demographic. The astute FinTechs figured this out, and started thinking about how to add value to the overburdened millennial’s life. The not so astute ones have tried to prey on the demographic to make a quick buck.
All in all, the data shows clearly that millennials care about their finances as much as the generations before, but they need systems that are on their side to help them navigate a complex world.