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Majoring in Money: Working with Millennials

Agenda • Who are the Millennials? – Their expectations

• Habits of college students – – – –

methods used to pay for purchases their knowledge self assessment their money management skills

WHO ARE MILLENNIALS?

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Millennial Generation • Born: After 1980 • Age of adults in 2014: 18 to 33 • Share of adult population: 27% • Also known as Generation Z numbering roughly 77 million, millennials make up about one-fourth of the US population

(Nielsen) • More racially diverse than previous generations Source: Pew Research Center

Millennial Generation •

Millennials are the largest generation on our planet

•

To put things into perspective: 120 million people, the population of Mexico, are going to be turning 18 every year for the next 16 years

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As the Baby Boomers (born between 1946 and 1964) taught us, the larger the generation, the greater the influence over norms, expectations and behavior. With the Millennials comes mega change…

Source: TIME 2015, pluralthinking 2015

Education Level • One-third of older millennials (25-34) have a 4-year college degree –Recession impact on enrollment: •2007: 34% 18-24 yr olds enrolled in college •2012: 37% 18-24 yr olds enrolled (peak year) •2015: 35% 18-24 yr olds enrolled • Macro view: –When Boomers were aged 18-24 they were the #3 most- educated population in the world; –Millennials are #16 • College-educated millennials are more affluent than the national average

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MILLENNIALS EXPECTATIONS

Personal Economics • •

Higher unemployment rate than Boomers and GenXers had at same life-cycle stage Higher rate of poverty than Boomers and GenXers had at same life-cycle stage – Non-college educated face stiffer penalties and a widening economic gap in an increasingly knowledge-based economy

Marketing Trends • Trend #1- Tech Immersion • Trend #2- Mobile Payment Will Become the Norm • Trend #3- Reimagination of Social Marketing

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How to Engage the Generation • Millennials indicated a trend towards the easier to use, more transparent, data-driven, and automated processes • They want content that provides solutions and advice that is relevant to them • They want information that can be directly applied to their specific financial situations and they are looking for it within their social networks • They switch tasks quickly enough to appear to ‘multi-task’ • They switch attention between media platforms 27x per hour (text, snap, etc) • Primed to say it in 140 characters or less • Obsolescence: trained to expect that there will be a next version

MAJORING IN MONEY: HOW AMERICAN COLLEGE STUDENTS ARE MANAGING THEIR FINANCES

Research Methodology Survey Focus • To learn more about how students are managing their finances • To understand credit-related knowledge gaps and financial literacy needs

Background • • • •

Interviews conducted by Ipsos in December 2015 Sample reflects a cross-section of key demographic variables 800 in school students Between the ages of 18-24 years old

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Insights •

College students are handling their finances responsibly

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Their general attitudes are sensible

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While positive behaviors are apparent, they mask an underlying knowledge gap

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Students are eager for more information and resources to understand and improve their credit management

Spending Money •

Today’s college students are not shying away from credit cards

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While carrying credit cards & debit cards, cash is king

– 56% have at least one in their wallet

– 85% use debit cards for most other purchases and payments – 86% carry cash typically for in-store purchases of $20 or less – 77% use a mobile payment method • •

Ages 18-20 do so for ease of use Ages 21-24 do so for security

– 17% use ATM – 14% write checks

Considerations When Using Credit •

Having a credit card doesn’t necessarily mean students are overspending

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College students are savvy shoppers picking cards that offer points or cash back.

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If they have a credit card they typically use it regularly.

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When it comes to learning about money management, most college students have been home-schooled

– 59% said reason for getting a credit card was to build a credit history

– – – – –

68% said their parents influenced their decision on 1st credit card 21% said their parents selected their first credit for them 71% said they learned how to manage money from their parents 23% learned about money management from online research 14% have consulted a financial advisor

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Attention to Credit Health •

Today’s college students are very focused on effectively managing their finances – – – – –

77% pay their bills on time 65% have a paying job 60% never spend more than they have 55% save some money each month Only 4% report no practices to effectively manage their finances

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Students are effectively managing their payments

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The reality is those who are carrying a credit card are using it responsibly

– 73% are paying their credit card bills themselves

– 63% pay their credit card balance due in full each month – 8% pay the minimum amount due each month

Credit Report Awareness CREDIT AWARENESS BY AGE TOTAL

A GE 1 8 - 2 0

A GE 2 1 - 2 2

A GE 2 3 - 2 4

49%

18%

33%

16%

55%

16%

25%

19%

69%

17%

25%

12%

19%

14%

5%

8%

EVER VIEWED OWN CREDIT REPORT Yes, I have viewed

Not viewed, but know I have one

Not viewed, not sure I have one

Not viewed, I don't have one

Financial Awareness & Habits •

The connection between benefits and behaviors: Most college students understand the value of good credit . . .

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. . . and the majority know how to get and maintain credit – 93% know paying bills on time is a positive credit behavior – 63% know keeping low credit balances is a positive credit behavior – 61% know that using as much credit as possible and 61% opening multiple credit accounts at the same time are negative credit behaviors – 58% know that having no credit cards is a neutral credit behavior

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LET’S TAKE THE CREDIT QUIZ

Self Assessment Self-Rated Money Management Skills Not Very Good, 5%

Poor, 1%

Excellent, 24%

Average , 29%

Good, 41%

Poor

Not Very Good

Average

Good

Excellent

Blend Skills + Quiz =…. •

College students are confident in their money management skills – 65% rate themselves as excellent or good – If you rate above average, feel more confident to qualify for credit

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The Credit Quiz – Interest accumulation – Effect of payment on credit – Impact of repayment term

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Three Question Quiz 1.

Interest accumulation question: Suppose you had $100 in a savings account and the interest rate was 2% per year. After 5 years, how much do you think you would have in the account if you left the money to grow? a. More than $102 b. Exactly $102 c. Less than $102 d. Not sure

Effect of payment behavior on credit cost 2.

Assuming the following individuals have the same credit card with the same interest rate, which will pay the most in interest on their credit card purchases over time? a. b. c. d. e.

Joe, who makes the minimum payment on his credit card bill every month Jane, who pays the balance on her credit card in full every month Joyce, who sometimes pays the minimum, sometimes pays less than the minimum, and missed one payment on her credit card bill All of them will pay the same amount in interest over time Not sure

Impact of repayment term on cost of credit 3.

Imagine that there are two options when it comes to paying back a loan and both come with the same interest rate. Provided you have the needed funds, which option would you select to minimize your total costs over the life of the loan (i.e. all of your payments combined until the loan is completely paid off)? a. b. c.

Option 1 allows you to take 10 years to pay back the loan Option 2 allows you to take 20 years to pay back the loan Both options have the same out-of-pocket cost over

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How Much Do They Know About Credit?

SELF-RATED MONEY MANAGEMENT SKILLS

CORRECT QUIZ RESPONSES BY PERCEIVED MONEY MANAGEMENT SKILLS EXCELLENT

23%

33%

30%

13%

GO O D

33%

33%

22%

A V E R A GE

32%

36%

18%

N O T GO O D / PO O R

TOTAL

38%

29%

31%

12%

14%

25%

33%

22%

8%

13%

# OF QUIZ QUESTIONS ANSWERED CORRECTLY 3 of 3 correct

2of 3 correct

1 of 3 correct

zero correct

Money Management Education • •

College students demonstrate careful approach Regardless skill self-rating or quiz performance - students are eager to learn more – More than 4 in 5 expressed interest in learning more about specific aspects of managing money – The topics of most interest are: • 37% Strategies for saving • 32% Paying for college options • 32% Budgeting

GETTING MILLENNIALS TO ENGAGE & BEST PRACTICES DISCUSSION

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Learnings & Next Steps to Consider • What Challenges do you face when trying to engage students in financial education? • What take aways did you learn or ideas to put into practice?

• Provide helpful, relevant, and easy-to-understand information

Communications Matter •

Communicate with student borrowers by means they feel most comfortable – Video narratives embedded within e-mail messages – Reduce text-laden letter content in all (direct- and e-mail) communications – Mobile, Text

• Consider using alternate ways to connect – peer to peer, chat, social media, etc •

Offer “non-workday” hours of operation – Nights, weekends, etc.

I am important - How does that help me? Millennials want content that provides solutions and advice that is relevant to them • Self-serve/manage/control They want information that can be directly applied to their specific situations and they are looking for it within their social networks • Practical – there has to be a reason

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Questions?

The information contained in this presentation is not comprehensive, is subject to constant change, and therefore should serve only as general, background information for further investigation and study related to the subject matter and the specific factual circumstances being considered of evaluated. Nothing in this presentation constitutes or is designed to constitute legal advise.

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