Are millennials actually held back by their finances?
Who is to blame for their situation? The economy, the education system, the financial sector - or is it just a bad case of YOLO?
Most importantly, how can technology help?
These were just some of the questions we aimed to answer on a panel discussion on the 15th September with Common Vision. We reflected on insights from their comprehensive Millennials and Money report, and explored how we can help build financial resilience in light of the current economic situation.
As a financial health startup working with a largely millennial audience Wollit has a unique vantage point on the problem. We focus on the significant proportion of millennials in volatile work. These include shift workers, agency staff, gig workers, freelancers and those on zero-hour contracts.
A stable predictable income is the bedrock of financial resilience. So our first product, the Wollit Income Promise, is an income smoothing tool. It enables people to take home the same amount of money every month even if their hours or earnings fluctuate. This provides people with income certainty so they can budget and plan with confidence as well as guaranteed access to cash flow when they need it most.
Younger generations face a raft of structural issues and macroeconomic headwinds:
to name but a few.
Whilst the CoVi Millenials and Money report, and the wider economic outlook, do paint quite a grim picture. There are many nuggets of positivity, and seedlings of hope - if you look for them.
Our perspective, from the trenches developing and operating fintech services to millennials in the UK, looks like this:
We are blessed with progressive regulators and policymakers who encourage and facilitate innovation.
Moreover, we have a large, well-funded investor base willing to back creative solutions to complex financial problems.
Millenials often make liberal use of new tools and services even in their earliest stages of development. We can see this clearly with the quick migration to neobanks and growing use of tools leveraging Open Banking technologies.
They are also liberal in their attitudes to sharing their personal and financial data. Hence, making innovative solutions to the problems they face possible.
Millenials are not paralysed with data privacy anxiety as some other groups are, and are open to trialling unproven tools and services.
From a macro perspective, we are on fertile ground for fintech-led innovation to flourish in boosting financial resilience.
Financial education in schools is non-existent. No one within the education system, or elsewhere, has taken the responsibility of teaching financial health or explaining basic money concepts.
School teaches us about physical and mental health, but not about financial health. As a result of this void, millennials often lack basic financial knowledge and encounter grave yet avoidable difficulties down the line.
Whilst fintechs can really do wonderful things, they can’t conceivably be expected to take on the onus of teaching money 101 to the population-at-large.
Without this firm bedrock, even with the greatest will in the world, financial resilience will likely remain elusive for many.
As part of our product, we ask customers to provide us access to their bank transactions using Open Banking. Because of this, we have a unique vantage point into the financial lives of millenials.
From our anonymised analysis, it is evidently clear that many lack even the most basic good financial habits. Some of our findings have been very surprising.
It is important not to disparage. By all means everyone is free to live their lives and spend their money however they so wish. But there are a few simple rules for building financial resilience that are axiomatic. For example, spending less than you earn, putting money away for a rainy day, and the like.
Whilst millennials do undoubtedly have it rough due to factors way beyond their control, some laws of economics are immutable. And all the technology in the world won’t be able to engender financial resilience if these few core principles aren’t adhered to.
We need to educate, encourage, and reward good financial hygiene from an early age. That is the only way we will have a fighting chance at overcoming some of the more complicated things which prevent financial resilience for many.
Technology can definitely help, but it can’t do it alone.
As a regulated lender, we perform credit checks on applicants as part of their application process. Hence, we have now processed thousands of credit files. This - more than anything we’ve encountered recently - gives us cause for concern.
Many millenials have done, or continue to do things, which cause great harm to their credit files. These have often been results by omission or commission. This is a burden they will have to carry for years after the events themselves have long been forgotten.
We’ve seen countless people, whose credit files are replete with ‘black marks’ for trivial things they did years ago. These marks make them persona non grata to lenders anywhere and everywhere to this day.
A bad credit file, not only impacts someone’s ability to access credit, which in our age of COVID 19 and economic uncertainty will likely become all the more needed. Furthermore, it affects countless other areas of life, most of which fly below the radar.
The ability to access the best utility tariffs and rates, the ability to pay bills in arrears rather than advance, a landlord’s desire to rent you a property, perhaps even being offered a job can all hinge on a credit score.
Many millennials don't even realise the significant poverty premium attached to having a bad credit file. It’s saddening to see people in their late twenties and early thirties suffering today for missing payments as a teenager. These are unnecessary errors. We must find a way to eradicate them. If we don’t, I fear levelling-up the financial resilience of those who need it most will remain elusive.
As an ethical fintech, it comes as no surprise that we believe that software and technology undoubtedly have the power to heal.
Fintech is a force for good and there is significant low-hanging fruit accessible to boost financial resilience on the margins. There is also much easy remedial work we can do and innovations we can bring to bear to get things moving in the right direction.
However, really slaying this beast requires a much-broader team effort. We need material interventions far higher up the food chain, specifically in terms of education and public policy to improve the relationship between millennials and money.
Yet again, whilst technology can very much assist, it needs the bedfellows of education to make a real impact.
We see technology, alongside education and progressive policy, as one of the trifecta which can bring about acute and sustained positive change to the financial lives of all of us - and especially to millennials.
We can’t single-handedly boost financial literacy amongst millennials, nor bring the policy changes necessary to give people living modern work lives all the support they need. We can, however, create innovative financial tools and services to make millennial lives that little bit smoother. And that’s what we’re doing.
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