Earlier this year, I wrote a post about how millennials tend to be risk-averse when it comes to making financial decisions. Because millennials grew up watching various financial crises, such as the dot-com collapse and the Great Recession, they may have formed a negative attitude toward financial-risk-taking and an overall distrust in the financial system. I’d referred to a 2017 survey
that showed that millennials are more afraid of credit card debt than of dying. This speaks to a need for more focused financial education tools and advisers to help young people—millennials and Gen Zers alike—increase their financial literacy and gain more trust in the financial system.
I recently attended Finovate 2019, a conference where technology startups showcased their latest fintech innovations in seven-minute demos. Industry leaders shared their insights on various topics in financial services, investing, insurance, and biometrics, to name a few. As a millennial, I found what resonated with me the most were all the developments targeted to my age group, from fractional investment apps to interactive robo advisers that aim to make the entire banking experience less intimidating.
One of the biggest financial burdens that millennials face today is paying off massive amounts of student loan debt. An NPR article states that "student loan debt in the United States has more than doubled over the past decade to about $1.5 trillion." In fact, millennials and Gen Zers have become so crippled by student loan debt that they are delaying and even forgoing the American dream of becoming homeowners because they perhaps mistakenly view it as taking on additional debt, despite all the benefits of owning a home. Similarly, they view credit cards as just another way to take on debt, not as an opportunity to build up or improve their credit.
But now, thanks to startups like those at Finovate, apps and other software are now addressing the student loan debt problem by providing advice to families on the cost and return on investment of college, based on career and salary, as well tools that project financial aid packages for each school. One intriguing millennial- and Gen Z-focused app showcased at the conference was a gamified money management app that rewards users in real cash for saving or achieving a financial goal. Another was a financial literacy app that breaks down complex financial concepts into a quiz format and rewards users with cash or gift cards when they complete the quiz.
It is encouraging to see fintechs and even banks taking notice of the financial needs of the younger generations and developing products and services that better cater to their unique expectations, in a fun, creative way. Could these apps help these young people shift from their current, risk-averse mindset and give them greater confidence in the financial system so that they can take more risks with their money and ultimately build more wealth? Let us know.
By Catherine Thaliath, project management expert in the Retail Payments Risk Forum at the Atlanta Fed