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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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August 23, 2021

A Mindset Shift among the Younger Generation

Back in 2019, I wrote a post about millennials being risk-averse when it comes to finances. This is largely due to a number of financial hurdles and crises they had to face growing up—the 9/11 attacks, the Great Recession, an unstable job market—all events that negatively shaped this generation's attitudes toward taking financial risks and the financial system in general. In fact, a surveyOff-site link found that of the millennials in credit card debt, more than a third said "debt is the scariest aspect of their daily lives," more so than the thought of dying or of war. Move ahead two years and here we are in another global crisis, with the younger generation taking yet another economic hit. According to some researchOff-site link from the Federal Reserve Bank of St. Louis on employment between 2000 and 2020, "weakness in the job market in 2020 was experienced very differently across age groups and genders. Young men and women [born after 1985] felt the greatest impact of lower employment during that period."

The pandemic has forced everyone to rethink many things: how we work, how we conduct business, how we communicate with others, and how we use technology, among other things. But could it have helped push millennials and Gen Z-ers to think more positively about taking financial risks? As my Risk Forum colleague Claire Greene noted in her recent blog post, millennials became more likely to have a credit card during the pandemic in 2020—66 percent of millennials had a credit card in 2019, and nearly 80 percent did in 2020. In addition, more millennials are buying homes now and are opting into other long-term investments rather than spending money on rent and more short-term activities.

Of course, it's important to point out that this change in millennial behavior may not be solely attributable to COVID-19, but I believe the pandemic may have been a factor. A studyOff-site link the Pew Research Center conducted showed that in July 2020, a majority of young adults (ages 18–29) in the United States resided with one or both of their parents, something that hasn't happened since the Great Depression. A number of relief measures offered in response to the pandemic—interest rate cuts, economic impact payments, student loan payment deferments, and flexible credit card repayment options, coupled with the money saved from living with mom and dad—could all have contributed to millennials' decisions to take more financial risks. Other factors independent of the pandemic, such as the increased availability of financial education tools and millennial-centric innovations in financial technology, may have also contributed. Whatever the reasons, I'm happy to see that taking financial risks is being viewed more positively among the younger generation, despite all the chaos of this past year.