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Gens under the lens: The Millennial consumer

  • With 72 million people, the millennial generation is the biggest in the history of the U.S., and also the most racially diverse. Growing up with high student loans, and to a high inflation economy, their unique needs will guide financial innovation of today and tomorrow.
  • The U.S. is set to go through the largest inter-generational transfer of wealth in history, with $30 trillion set to change hands over the next few decades, and millennials will be at the receiving end of it.
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Gens under the lens: The Millennial consumer

Tearsheet is running a new series, Gens Under the Lens. It’s a look into the evolving financial archetypes of the generations — from Boomers to Gen X to Millennials to Gen Z. We look at the current research into their beliefs and habits, giving a sharper view for marketers and product people to better understand what drives today’s financial services customers.

A significant 21st-century shift in the philosophy dictating product development has been the focus of a product — evolving from spotlight focus to laser focus. A product is no longer developed to fulfill a general purpose, floated in the market to get as many people to do what they wish with it. In product development today, the primary focus is on the audience — to find a niche with a scalable pain point, and to serve that fully with a robust solution.

For those developing or marketing financial products today, one of the key demographics, with the promise of arguably exponential growth in engagement, are the millennials. They are the wealth creators of today, the wealth holders of tomorrow. Who are they, what’re they up to, and what do they want? Well, read on.

Millennial archetype

‘Millennial’ is the name given to Generation Y, or people born between 1981 and 1996, as defined by the Pew Research Center. It is the biggest generation in American history, numbering 72 million people. In addition, around 43% of millennial adults are non-white, making them the most racially diverse generation. A term popularly associated with the generation is ‘Digital Native’, and that is among their defining characteristics. They were the first generation born into technology, witnessing the consequent boom as they grew older, and naturally developed their lives around it.

Millennials came of age in a troubled economy, with the oldest beginning their careers as the dot-com crash happened. Others walked out of high school amidst the 2009 stock market crash and were just starting off their careers as COVID-19 wreaked economic havoc. 30% of Americans between the ages of 30 and 49 say that they, or someone in their household, lost a job due to the pandemic, according to Pew.  

Money troubles: Why they worry

What makes saving and investing even more difficult for the generation is rising debt, accrued at a young age.

A recent Experian consumer debt study found that, in 2020, millennials’ total average debt increased by 11%, second-most of any generation, swelling up to $87,448. A large portion of the debt that millennials carry comes from student loans, of which an average millennial holds $38,877. In addition, it is estimated that some 3.5 million millennial borrowers owe $20,000 to $40,000 in debt. Add the two elements of earning and debt together, and you might understand why so many millennials say they simply don’t make money enough to save. 

The rising cost of goods and services is another factor driving millennials’ financial woes. The Bureau of Labor Statistics recently reported that inflation in the US in 2021 increased the most it has since 1982, at 68%. And according to the Labor Department’s data, the increase in prices of goods has been the steepest in the categories millennials are likely to spend most in. These include housing — where the generation has the highest share of consumer spending — food & alcohol, transportation, health care, and education.

Financial literacy: What they know (or don’t)

A study found that a significant portion of US adults functions from ‘a position of poor financial literacy.’ In the first five years of the project, U.S. adults could only successfully answer 50% of the questions presented to them. Among millennials, in particular, 52% of the respondents managed to answer just half or less of the questions successfully.

While millennials (60%) were able to answer questions regarding their functional knowledge of borrowing almost as successfully as baby boomers (66%), they didn’t fare well in questions regarding investing, insurance, and comprehending risks. As a result, traditional banking services, with their tedious processes and insufficient efforts in communicating with customers, has led them to fall out of favor for Gen Y. In fact, 78% of millennials reported being dissatisfied and frustrated with traditional banking service. Hence, they have been eager to adopt fintech solutions, as they not only prove to be simpler and more engaging experiences but also educate step-by-step in familiar ways.

In a survey, 67% of millennials said they would turn to neobanks for their financial needs, due to their tech-based solutions and faster services, versus just 53% of total respondents. Millennials also have a taste for customized solutions with respect to their financial lives. An Accenture survey found 58% want their bank to offer them more personalized advice and solutions that help them succeed financially.

The Millennial Consumer: Saving, investing, and spending

Millennials, as a generation, are struggling to save — some 66% feel they’re not on track when it comes to saving for retirement. A reason for this is that after their expenses, they simply don’t have any money left to save. Let’s do some math to demonstrate this. The U.S. Census Bureau data reveals that in 2020, the median millennial household pretax income was $71,566. A separate study on the spending habits of different generations found that millennials spend an average of $208.77 daily. This estimate includes the average daily costs of groceries, housing — millennials’ biggest expense — utilities, insurance, entertainment, and eating out. Roughly working that number up to a year, we can estimate an average millennial spends $76,201, which is more than the generation’s median household pretax income. 

However, that’s not to say that the generation isn’t saving at all. In fact, they’re starting to save sooner than any generation before them. A Wells Fargo report found that millennials started saving for retirement at an average age of 25, much younger Gen X (30) or boomers (36). According to a  2020 survey, 73% of millennials were actively saving for major life goals, and 59% had saved $15,000 or more. More surprising  is that nearly one in four millennials have $100,000 or more in savings. According to the study, millennials’ top financial priorities include saving for retirement (75%) and building an emergency fund (51%). 

Millennial savings, however, took a hit as the world locked up in light of the COVID-19 pandemic. A study found millennials to be more likely than older generations to dip into retirement funds in order to meet pandemic-time expenses. According to the study, 33% of millennials had already dipped into their savings, or were considering doing so, compared to 15% of Gen Z.

In popular culture, millennials are often portrayed as a generation wanting to save big and retire early, but that was refuted by a CFA institute study on millennials and investing. The study found that while some in the age group expected to not retire at all, those that did expect to do so by 65. In fact, another survey found that  61% of older millennials born between 1981 and 1988 say they’re planning to work a second job or pick up part-time work during retirement.

Almost mathematically, the inability to save and having to service loans serve as a barrier in millennials’ entry to investing. The same CFA Institute study found that 50% of non-investing millennials cite insufficient savings as a major hurdle, and 52% of millennials with retirement accounts cite debt as a major concern. However, that is not to say that millennials aren’t investing — in fact, 31% started investing by the age of 21, a significantly higher percentage than baby boomers (9%), and Gen X (14%) by that age. The most popular investment options for millennials were found to be stocks (66%), mutual funds (47%), crypto (39%).

How Millennials feel towards financial services

A banking preference that has become central to millennials’ financial lives is their decision to go digital. A study by non-profit BAI revealed that 79% of millennial customers use online banking to open a deposit account. That fuels the popular notion that millennials don’t want to bank at branches anymore, and would rather do everything online. A survey by financial services firm Kasasa, however, shed light on how that could be an incorrect judgment. 77% of millennial respondents said that, among challenger banks, they would switch for one that offered both online and in-branch banking options. 

A study found that, among Gen Y and Z, about half who opened a checking account in the past three years dealt with a bank branch employee during the process, and roughly a third talked to a call center representative. So, with all options available online, why are so many of the digital natives heading to branches? Around 40% said they couldn’t find what they were looking for on the application; another 40% said they simply felt in-person would get the job done faster; and 25% said their service provider did not have the required online capabilities. However, there’s another underlying reason slowly becoming apparent: some people just prefer human interaction. They find it helps perform their tasks faster and feels more personal.

Cornerstone Advisors research found that among millennial consumers, 42% said they were calling their banks more and 42% also said they were visiting branches more. A Deloitte study on millennials’ banking habits revealed that while many enjoyed online tools, a significant portion complained about a lack of physical bank branches, where they could meet someone face-to-face. So, the solution to banking millennials does not lie entirely in the digital realm, or in brick-and-mortar branches, but somewhere in between.

To understand how readily millennials have accepted modern technology’s innovation in finance, we review the success of new products like A2A and P2P payments and BNPL among the generation. With new-age apps like Venmo, Square, and ApplePay, 40% of millennials said they are using peer-to-peer payments more frequently. In fact, 50% of millennials said they are relying on e-transfer banking services to pay bills and perform everyday banking transactions. Similarly, during the pandemic, 21% of millennials reported using BNPL offerings and other installment plans.

Financial tools and companies serving Millennials

Millennials, broadly speaking, turn towards digital platforms for their financial needs. As a result, several millennial-focused service providers have sprung up, providing digital solutions for their specific financial concerns. A non-exhaustive list of platforms popular among the demographic, organized by its needs, is as follows:

  1. For investing, they use Robinhood, Personal Capital, Binance;
  2. For budgeting, they use YNAB, Digit;
  3. For credit score management, they use Credit Sesame, Credit Karma;
  4. For student loan management, they use ChangED, FedLoan.

A look into Millennials’ future

It is projected that, in the next few decades, the US will witness the largest inter-generational transfer of wealth in history, as assets worth $30 trillion will move from older generations to younger ones. In fact, researchers found that one in 10 young consumers expects to receive an inheritance in the next two to three years. Millennials are reaching the stages of their lives where they wish for stability, as they begin their own families and have kids, and hence on the expense side of things, they want to buy homes. So, with wealth coming their way and the desire to own homes, what’s next for the generation?

Financial advisors.


A Broadridge survey found that, over the next few years, more millennials will be turning to financial advisors than ever before. They found that of the 39% of millennials not using a financial advisor, the majority (65%) plan to begin using one in the next two years. Why would they be doing that? Well, of those without an advisor, 53% state that it’s due to the concern of not being on track to meet financial goals, and 46% said it’s to reduce financial stress.

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