Millennials and Personal Finance: New Technology, Old Challenges
Millennials have conflicted feelings about their personal finances; they are uncertain but lean toward optimism. This conclusion is in accordance with a recently released Experian report originating from a survey of more than 1,000 millennials, ages 19-34, about a variety of personal finance topics – from their future views, to loan status, to credit knowledge, to use of technology.
The survey follows a July 2015 report from Experian that analyzed credit bureau data and placed millennials last in generational credit score rankings.
Topline survey results include:
- A surprising number lack knowledge about credit – or show apathy toward it
- A majority have had their credit, loan or lease attempts impacted – positively or negatively – by credit scores
- Millennials embrace technology and are quick to try new offerings – at the expense of loyalty
“Millennials are coming of financial age at a very unique time,” says Guy Abramo, President, Experian Consumer Services. “They’ve experienced a recession and the explosive advancement of personal technology. As a result, they’ve developed different views toward managing money, using credit and how they expect financial services to be delivered. The survey also showed that millennials will abandon loyalty for better products and services, which is something the entire financial services sector should consider; the pressure is on to keep innovating.”
Perception vs. Reality:
- Millennials miss the mark when estimating their generation’s average credit score (654 [est.] vs. 625 [actual]), average debt $26,610 [est.] vs. $52,210 [actual], and average debt, excluding mortgage ($12,580 [est.] vs. $26,485 [actual]).
- Despite being associated most closely with student loan debt, credit card debt takes first position as the most common millennial debt (38%), followed closely by student loans (36%). Others, in descending order, are: auto loans (28%), home loans (20%), personal loans (17%) and “other” (14%).
Pushing the Edge of Personal Finance:
- The majority of millennials (57%) use financial mobile apps to manage their finances
- Millennials have, on average, three financial apps on their phones
- Most (57%) millennials are willing to use alternative companies/services that innovate to better meet their needs
- A significant number of millennials (39%) are familiar with “non-bank” lenders (e.g., Prosper, Lending Tree, Upstart) and 13% have already used such a service
- Nearly half (47%) will likely use alternative lenders in the future, citing easier application process, not dependent solely on credit score, more accessible, faster review process and digital savvy
Loyalty to a Financial Brand Is a Tough Sell:
- Many millennials (46%) look for new financial companies/services that better meet their needs
- More than 3 out of 4 millennials will switch financial accounts if they find a better alternative
- Most frequently mentioned reasons to switch include: better interest rates (47%), better reward programs (43%), better identity protection (32%) and better customer service (35%), among others
Credit Knowledge Deficit:
- Most millennials feel confident of their credit knowledge (71%); however, 32% don’t know their credit scores and 67% have questions as to how their scores are created
- Among those who check their reports less than every three months, reasons for not checking reports and scores include: not necessary (35%/37%), afraid it will hurt their scores (24%/22%), unsure how to check their credit reports/scores (19%/18%)
- Millennials are very aware of how credit scores impact them; nearly 3 in 4 had a lending or leasing experience helped or hurt by their credit scores
Youthful Angst, but Optimism Prevails:
- Despite most having a handle on their finances (73%), more than half feel that they are “going it alone” (59%) and that “the odds are stacked against them” (57%)
- Top financial future concerns are supporting a family (30%), retirement savings (28%) and financial independence (25%)
- Nearly 3 out of every 4 survey participants had their loan, credit or rental applications impacted – positively or negatively – by their credit scores
- Despite the concerns, 83% of respondents says being debt-free is an attainable goal; 71% feel confident about their financial futures
View the full report here.