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Millennials Are Saying No to Traditional Financial Products

When many Millennials see anything traditional, they run the other way, and that includes financial services. According to a new national study by The Center for Generational Kinetics and Global Cash Card, some five million Millennials do not have a checking account. What’s the turn off? Nearly half of them said they don’t trust banks.

"Not surprisingly, Millennials have become innately distrustful of Wall Street, yet they want to save, but don’t know how to do so on their own," says Eyal Fruchtman, CEO and founder of Clink, a no-fee saving and investment app geared to Millennials.

Remember, the Millennials grew up during the 2008 financial crisis. "They probably saw their parent really struggle to survive. They have some of the same emotional scars that children of the great depression carried,’ says Peter Hoglund, a certified financial planner and vice president at AEPG Wealth Strategies.

Then there’s technology. "No single member of their generation can function without a piece of technology in his or her day-to-day life, which is why non-traditional banking has seen a spike in recent years," says Fruchtman.

Millennials are interested in saving time and living more in the moment because we value time as the single most important asset we possess.
—Parker Lenz, CEO of Fox River Capital

The rapid rise of next gen financial products means Millennials will have an unprecedented number of banking options – from splitting the restaurant bill, to investing in retirement, nearly every task that ever involved cash, credit, investing or brick and mortar banks will now be available on a mobile platform, says Gabe Fenigsohn, research manager at Cardwell Beach, a digital creative agency. "The ease, speed and cost savings of this new frontier can be a boon to younger consumers, who experience higher rates of exclusion from the world of traditional finance. As fin-tech gains traction, previous barriers to banking are removed," he says.

Then there’s the matter of money. "I think Millennials are frustrated with being gouged by fees by big banks. I don’t have a checking account. I put everything through my line of credit, including my paycheck. This ensures everything gets paid off in a big lump sum each month and it helps build my credit score automatically," says Millennial Luke Glofcheskie, an investment advisor at Euro Pacific Canada.

The benefit of Millennials going to non-traditional routes for financial services is that they get products and services that are tailor made for their behaviors and needs, points out Sebastian Fung, vice president of crowdfunding platform WeFinance. "Many tools are mobile only and don’t include branches. At the same time, they don’t have minimums or annual fees (typically used to support branches), he adds.

WeFinance has seen surge in growth among Millennials using its crowdlending platform. "That’s because we’re credit score agnostic. Millennials as a whole don’t really like the old system and how financial was previously done, especially ones who graduated during the market downturn."

Some wealthy Millennials have turned to robo-advisors to invest by numbers and cut out the advisor, says Michael Griffin, hedge fund manager and founder of HedgeACT, a marketplace for alternative investments.

Any downside?

While Millennials thumb their noses at tradition, there are some considerations. "The biggest risk would be for larger financial products like auto loans and mortgages, since many of these are solely offered by traditional banks that look at traditional metrics like credit scores," says Fung.

And although peer-to-peer loans may be more lax in extending credit than traditional bank loans, rates can be significantly higher and terms restrictive. "This should still be considered a last resort at best," says Hoglund.

There is something to be said for the importance of developing a close relationship with a local bank, adds Mark Little, founder and president of Diversified Funding Services.

The challenge for banks

The question is, what do Millennials want? "Our research shows that, more than any generation before, Millennials seek discovery and new experiences. They are looking for a banking partner that can provide mobile guidance and resources to help them make their own choices in securing their long-term future, while also being able to do the things they love today," says Chris Rockwell, CEO and founder of consultancy, Lextant.

There is ample opportunity for banks. "Banks can utilize technology as an effective tool for communication, on-the-go transaction, and a resource for knowledge. For example, a bank could do notifications about how money is being spent and make suggestions for achieving financial goals," says Rockwell.

Millennials also dig brands that give back. "With their every involvement with the brand, banks can support cause marketing, donate to charitable organizations, and develop affinity programs with groups such as alumni and professional associations – all in the name of their customers. This is a powerful Millennial motivation to stay with the brand," says Rockwell.

Says Parker Lenz, CEO of Fox River Capital, "Personally, if a financial company can provide ways for me to automate things I am more likely to use their services. Automatic bill pay is key, not nailing me with fees if I am a day late with a payment because I forgot to pay my bill. If an institution can save me time I am more likely to use that platform. Free mobile check deposit was the single reason I chose Chase over U.S. Bank. Millennials are interested in saving time and living more in the moment because we value time as the single most important asset we possess. Leaving money on the table by providing free information or services will make people, especially Millennials, more likely to choose one alternative over another."

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Anonymous   |     |   Comment #1
Spoiled brats comes in mind. They know nothing of the real life out there, video games and isolation with texting same old stuff with same old friends. Not interested in reality. This nation is not going to survive without working habits of the young. No they do not want to save, free handouts feels better to them.
There you have, summarized the whole article in few words.
Anonymous   |     |   Comment #6
Easy there.... you're going to tear down their self-esteem LOL. 
Anonymous   |     |   Comment #25
Nope, sounds like you making assumptions without reading anything at all.
Anonymous   |     |   Comment #2
Useless article. 
Anonymous   |     |   Comment #9
You'll change your mind when they vote you into the poor house or he needle. Greed knows no limit.
klink   |     |   Comment #3
Yep, I live next to one. Male/25yo/college grad (barely) no job and lost previous ones he had each held for a very short time. Attributed to poor work ethic and those personal traits we each exhibit. Happy to free load off mom and dad and has no money at all.
Anonymous   |     |   Comment #8
Wow, I know two like that, both males.
Anonymous   |     |   Comment #4
Millennials Say They’re Too Impulsive to Save
While millennials say saving is a top priority, nearly 2 in 3 say that they can’t set aside any money because they spend too much on impulse purchases, according to a new study.
Anonymous   |     |   Comment #5
They want it all now.  Not willing to work and save for it.  Maybe they should have had to work for pocket change after school and work their way through college instead of "drunk'n fun in the sun Spring breaks".    
Volstagg   |     |   Comment #20
20 years ago when I was 25, people said the EXACT same thing about Gen X.  We where all spoiled entitled brats who would never save for retirement, be living at home until we're in our 50's, blah, blah, blah.

Gen-X'ers now are saying the same thing about Millenials that Baby Boomers said about us.  20 years from now Millenials in their 40's and 50's are going to say the same thing about whatever "tag" they give the next generation.

Listening to my grandparents talk about my parents when they where in 20's and 30's, I get the feeling it's all just a repeating pattern.  Every older generation thinks the younger generation are a bunch of slackers that will never amount to anything.
Anonymous   |     |   Comment #29
This is simply not true. I am a Gen-Xer and these things were never said about me or my peers. The issue at hand is how the Baby Boomers and Gen-Y's (millennial) view the world - which is vastly different than the Traditionalists (Baby-B's parents) and the Gen-Xers. I highly recommend researching this issue. Gen-Xer's have never been considered lazy as a group. In fact, we are often told we work too hard & are too task focused. I could not disagree more with your statements.
Anonymous   |     |   Comment #7
Millenials have no money saved. 51% have less than a grand. 18% 1-5K. 7% 5-10K. Only 16% have more than 20K. Millenials are the 18-34 crowd of whom 30% still live with their parents!
Anonymous   |     |   Comment #27
Not many people in their 20's are going to have 20K + in savings....not even back in the good ole 1950's.
Anonymous   |     |   Comment #28
shame on them
Anonymous   |     |   Comment #10
Millennials (18-34). How much did each of us have in the bank at that time? 
We did not start to save for retirement until 1979 when we first learned of IRA's. I was 36 years
old. Yes, I  married young and had a house paid for 58 acres paid for and almost had
our second home paid for but who thought of saving for retirement in the 70's. We all had pensions
that we had negotiated with our employer. We had sick pay, vacations, holiday pay, health insurance, with dental and eye care covered. We had 100% of physicals covered every year and all inoculations were covered 100%. Now we criticize the young who had MUCH higher education bills, and no benefits that they need to make it without these benefits and have a chunk in the bank. 
Anonymous   |     |   Comment #12
For the average wage earner...
If they don't save and INVEST early in life they lose the benefit of compounding. A 35-year old without a defined benefit pension and no serious savings better get their act together real fast or they'll be working until death. Oh, and those education bills are fraught with waste on a scale unimaginable in the 70's. Average student loan debt is $29,000, hardly a major burden for a college graduate...with a real skill set!     
Anonymous   |     |   Comment #16
college graduate...with a real world skill set! 
Anonymous   |     |   Comment #18
And that skill-set would be?
Anonymous   |     |   Comment #19
real world skill set:

Educated and skilled in a field that there is an actual DEMAND for.
Anonymous   |     |   Comment #22
thanks for that
Anonymous   |     |   Comment #23
It sounded as if you were a recent college graduate and I was asking what your skill set was/is.
Anonymous   |     |   Comment #17
"but who thought of saving for retirement in the 70's"?  I did.  I'm a baby boomer and my parents taught me well.  Not just to never spend more than I made, but never spend as much as I made.  Always set some aside and save it.  Live below your.  I never had a credit card until I needed one later in life for traveling, reservations, ordering on-line, etc.   Never paid a dime interest on it.  Always paid in full each month.  And by the way I wasn't a college educated professional, just an average blue collar worker now enjoying my comfortable retirement.
Anonymous   |     |   Comment #11
I'm a baby boomer, and I don't trust the banks either!
Anonymous   |     |   Comment #13
We know the bail ins are coming to pay for your social security, medicare, and Medicaid unfunded Ponzi liabilities.  Thus we avoid the banks and invest in real assets.
Anonymous   |     |   Comment #14
Can you imagine these pathetic little punks surviving the Great Depression or fighting WWII? They are useless. Have you noticed that most young "men" are complete wimps and talk with a high nasal voice like women.....and they need "safe rooms" at college because the delicate little flowers might get offended. Pathetic. This is the end result of liberalism.  Pajama-Boy wimps.
Anonymous   |     |   Comment #15
It is the education system run by the democrats, they promise them everything for free and they tell  them, they can be anything they like to be when grown up, just vote for the democrats after you are at the voting age.
How I know this, my niece tells me everything their teachers tell them during class and she is only 14 years old. And that is how a nation and few generations of youth got ruined.
Anonymous   |     |   Comment #24
The K-12 system lies more and more to young people. Instead of education it has become indoctrination by teachers, many of whom have never worked in the commercial world. The arrogance regarding climate change, social policies and the hatred for capitalism is rampant. After 30 years in education I've seen it all. Thankfully, education was a second career after the Marines and jobs in industry. Teachers (not all) are extremely self-centered, unwise about the real world and spoiled with time off, guaranteed pay raises based solely on attendance and pensions many can only dream of. If there's ever a real crisis in this country that requires true sacrifice I believe we'll be in very serious trouble.  
Anonymous   |     |   Comment #26
And the end result of conservatism is.... unpleasant brain-dead things (you no longer deserve to be called a person) like you?
Anonymous   |     |   Comment #30
Ok, folks, this is the Black Swan we've been predicting.
When students and former students are told they will be bailed out by the federal government (listen to your politicians) this is what happens. Default on such a massive scale only hints at the systemic problems hidden in our system. I say Caveat Emptor and garnish their wages until the bills are paid. But, that won't happen and we, the savers with capital, will again bail out the many thieves among us.    

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