Millennials and Money - the good, the bad, and the ugly.

Are millennials actually held back by their finances?

Who is to blame for their situation- the economy, the education system, the financial sector - or is it just a bad case of YOLO? 

Most importantly, how can technology help?

These were just some of the questions we aimed to answer on a panel discussion on the 15th September with Common Vision. We reflected on insights from their comprehensive Millennials and Money report, and explored how we can help build financial resilience in light of the current economic situation.

As a financial health startup working with a largely millennial audience Wollit has a unique vantage point on the problem. We focus on the significant proportion of millennials in volatile work. These include shift workers, agency staff, gig workers, freelancers and those on zero-hour contracts. 

A stable predictable income is the bedrock of financial resilience. So our first product, the Wollit Income Promise, is an income smoothing tool. It enables people to take home the same amount of money every month even if their hours or earnings fluctuate. This provides people with income certainty so they can budget and plan with confidence as well as guaranteed access to cash flow when they need it most.

Millennials and money - Wollit’s perspective

Millennials face a raft of structural issues and macroeconomic headwinds:

• The Cost of living
• Low paid jobs
• House prices
• Student debt
• And the prevailing lifestyle attitude of FOMO and YOLO 

to name but a few.

Whilst the CoVi Millenials and Money report, and the wider economic outlook, do paint quite a grim picture. There are many nuggets of positivity, and seedlings of hope - if you look for them.

Our perspective, from the trenches developing and operating fintech services to millennials in the UK, looks like this:

The good:

• We are blessed with progressive regulators and policymakers who encourage and facilitate innovation.
• We have a large well-funded investor base willing to back creative solutions to complex and sometimes seemingly intractable financial problems.
• Millennials have been shown to make liberal use of new tools and services even in their earliest stages of development. We can see this clearly with the quick migration to neobanks and growing use of tools leveraging Open Banking technologies.
• Millennials are liberal in their attitudes to sharing their personal and financial data, making innovative solutions to the problems they face possible.
• Millennials are not paralysed with data privacy anxiety as some other groups are, and are open to trialling unproven tools and services.

From a macro perspective, we are on fertile ground for fintech-led innovation to flourish in boosting financial resilience. 

The bad

Financial education in schools is non-existent. No one within the education system or elsewhere has been tasked with the responsibility of teaching financial health or explaining basic money concepts.

 We are taught about physical and mental health at school, but not about financial health. This is sorely lacking and causes grave yet avoidable difficulties down the line. Whilst fintechs can really do wonderful things. They can’t conceivably be expected to take on the onus of teaching money 101 to the population-at-large.

Without this firm bedrock, even with the greatest will in the world, financial resilience will likely remain elusive for many.

As part of their usage of our product, we ask customers to provide us access to their bank transactions using Open Banking. This gives us a unique vantage point into the financial lives of millennials.

From our anonymised analysis, it is evidently clear, that many lack even a cursory understanding of budgeting or basic good financial habits. We’ve been very surprised by some of our findings.

It is important not to disparage. Everyone is free to live their lives and spend their money however they so wish. But, there are a few simple rules for building financial resilience which are axiomatic, spending less than you earn, putting money away for a rainy day, and the like. 

Whilst millennials do undoubtedly have it rough due to factors way beyond their control, some laws of economics are immutable. And all the technology in the world won’t be able to engender financial resilience if these few core principles aren’t adhered to. 

We need to educate, encourage, and reward good financial hygiene from an early age. That is the only way we will have a fighting chance at overcoming some of the more complicated things which prevent financial resilience for many. 

Technology can definitely help, but it can’t do it alone.

The Ugly

As a regulated lender, we perform credit checks on applicants as part of their application process. Having now processed thousands of credit files - this more than anything we’ve encountered recently - gives us cause for concern.

Many millennials have done, or continue to do things, by omission or commission, which cause great harm to their credit files - a burden they will have to carry for years after the events themselves have long been forgotten.

We’ve seen countless examples of people, whose credit files are replete with ‘black marks’ for trivial things they did years ago, which to this day make them persona non grata to lenders anywhere and everywhere. 

A bad credit file, not only impacts someone’s ability to access credit, which in our age of COVID 19 and economic uncertainty will likely become all the more needed, but it also affects countless other areas of life, most of which fly below the radar.

The ability to access the best utility tariffs and rates, the ability to pay bills in arrears rather than advance, a landlord’s desire to rent you a property, perhaps even being offered a job can all hinge on a credit score. 

There is a significant poverty premium attached to having a bad credit file and many don’t even realise. It’s saddening to see people in their late twenties and early thirties suffering today for missed payments they made whilst a teenager. These are unforced errors.

We must find a way to eradicate unforced errors. If we don’t, I fear levelling-up the financial resilience of those who need it most will remain elusive.

How can technology help?

As an ethical fintech, it comes as no surprise that we believe that software and technology undoubtedly have the power to heal.  

Fintech is a force for good and there is significant low-hanging-fruit accessible to boost financial resilience on the margins. There is also much easy remedial work we can do and innovations we can bring to bear to get things moving in the right direction.

However, really slaying this beast requires a much-broader team-effort. Material interventions far higher up the food chain, specifically in terms of education and public policy are needed to get this job done.

Yet again, whilst technology can very much assist, it needs the bedfellow of education to make a real impact.

We see technology, alongside education and progressive policy, as one of the trifecta which can bring about acute and sustained positive change to the financial lives of all of us - and especially to millennials.

Where does Wollit come in?

We can’t single-handedly boost financial literacy amongst millennials, nor bring the policy changes necessary to give people living modern work lives all the support they need.

We can, however, create innovative financial tools and services to make millennial lives that little bit smoother. And that’s what we’re doing.