Millennials are expected to overtake Baby Boomers in population by 2019, reaching 73 million while Baby Boomers decline to 72 million, according to the U.S. Census Bureau. Though their numbers are strong, their financial situations are not. While there are indeed exceptions, millennials are launching their lives later, often strapped with a heavy student loan or other debt, with lower or missing FICO scores, and a history of postponing large financial purchases.
This is one of the biggest reasons why millennials have put off the milestones of adulthood. They just couldn’t afford to move out of their parents’ homes, buy cars, get married, buy houses, and have children. Saddled with debt yet striving for success, millennials also face another challenge. Only 24% of millennials surveyed could demonstrate basic financial literacy, according to a PwC survey. In another survey of millennials already saving for retirement, a third said they were “not sure” how their money was invested. Not knowing the nuts and bolts of money matters can hurt millennials’ financial prospects – as well as their ability to negotiate loan terms for a car purchase successfully.
According to a recent report from the global tech giant FIS, only 18% of customers with community banks are millennials. Credit unions look slightly better, at 32%. However, Millennials account for 42% of customers with big banks. Localized banks and credit unions struggle to generate awareness among this rising demographic.
The good news is this generation is eager to learn and will seek help. The PwC survey found more than 70% of millennials believed personal finance was an important subject to learn. Credit unions should embrace this opportunity, but straightforwardly deliver the content and meet millennials where they are – online. Provide necessary information in blog form, on social media, and on a website. Offer an online chat feature with a knowledgeable in-house resource.
While millennials are eager to dig themselves out of debt and get on the road to financial stability, they are still financially fragile. According to a Washington Post survey, 63% of millennials would have difficulty covering an unexpected $500 expense. In the study conducted by PwC, nearly 30% of millennial respondents reported that they were regularly overdrawing their checking accounts. Because of this, more young adults are turning to payday loans to get by, a recourse that can end up putting them deeper into the hole.
Help this generation get in a better financial situation by structuring loans with complimentary F&I products, like limited powertrain or vehicle return protection that protect their budgets. These products protect consumers from unforeseen circumstances that can negatively affect their ability to make their car or house payments. For example, powertrain protection gives consumers more control over their monthly budget by taking care of some of the most significant expenses related to a vehicle breakdown, the engine, and transmission. Meanwhile, vehicle return protection offers consumers a safety net to relieve their lease or loan obligation when unforeseen life events occur, like:
- Involuntary unemployment;
- Physical or mental disability; or,
- Critical illness, etc.
How can a credit union capture this challenging, yet potentially lucrative demographic? A consultative relationship with a knowledgeable loan officer can not only result in a mutually beneficial auto loan, but this relationship can also bear fruit in other areas including consumer protection products.
EFG Companies has been innovating consumer protection products for more than 40 years. We know how to keep you relevant with the current generation with F&I strategies that target the concerns of today’s consumers. Contact us today to find out how.