Many Millennials witnessed the aftermath of the 2007 Great Recession as they were entering the job market. Faced with a troubled economy, poor housing and job market and expensive student loans, Millennials may be more financially savvy than older generations are willing to give them credit for.
So, what are the money habits of Millennials? Some money habits are more obvious than others. Millennials favor peer-to-peer lending and alternative systems of payment, such as PayPal and Venmo. Millennials prefer prepaid cards, national banks and mobile banking. Millennials are taking conventional money habits and applying them to new products and providers.
A Preference For Prepaid Cards
The Federal Reserve Bank of Philadelphia released a report about the money habits of Millennials that had interesting and surprising insight. According the report, most Millennials have access to credit and debit cards but prefer to use prepaid cards. 83 percent of Millennials with debit cards use prepaid cards. Surprisingly, 60 percent of Millennials with a substantial annual income of at least $100,000 use prepaid cards. Many assume that only lower income households make use of prepaid cards.
It doesn’t make much sense when you look at the disadvantages of prepaid cards and compare how they function to a standard debit card. Prepaid cards often have higher fees, don’t report to credit bureaus and don’t carry the same protections as a debit card. In the era when you may make a deposit by scanning a check with your smartphone, the convenience of loading cash onto a prepaid card at a retail location isn’t so convenient.
Turns out, it’s a Millennial thing. Yet, it could also be the convenience of knowing exactly how much you have left to spend and mentally lessens spending temptations. Millennials are also more likely to trust banks than their parents.
Big Banks, Mobile Banking and Digital Channels
Given a preference for prepaid cards, the fact that Millennials favor big banks over small banks may surprise you. 68 percent of Millennials use big banks with branches across the country. Millennials aren’t interested in staying in one place and settling down as soon as prior generations. The economy is more global as is technology.
Millennials choose big banks largely for convenience and the fact that they offer mobile banking. The national banks have built a reliable reputation and are more easily located when needs arise. 87 percent of Millennials use online banking for convenience, and mobile wallet use is up 249 percent from last year. 56 percent of Millennials currently use or say that they will use non-traditional banking services, like PayPal and Venmo in the next year.
With more Millennials doing online banking, a secure cell phone is a must, but this tech-savvy generation likely already knows that. When checking your bank balance on the go, it’s best to not rely on public WiFi or unsecured WiFi. The use of data or a subscription to mobile text alerts are better for quick retrieval of banking information securely.
Millennials also have their priorities in check, with three out of four are discussing and saving for retirement and value experience over collecting material goods. The convenience of mobile banking, peer lending and mobile wallet apps make banking easier to take with you when traveling, especially globally. How credit is assessed for future generations will need to change as younger generations are changing how they place value on their lifestyles and purchases.
With the digital move for banking, everyone will be able to better manage and personalize their banking on the go. Yet, tried and true money habits still hold strong for Millennials and future generations.