MADISON, Wis. — Members of the Millennial Generation have been mislabeled as self-obsessed spendthrifts, yet a new reports suggests they present a truly unique opportunity for credit unions if handled appropriately.
"This generation gets a bad rap for being bad with money and I think that's a chicken and an egg problem because of the availability of cheap and easy money for the last 15 years," said Anya Kamenetz, author of Generation Debt as well as a new report from Filene's CU Tomorrow project titled, "Reaching Generation Debt: new Products & Strategies." "Obviously there is ignorance and a communication gap but it's not that these people have an inborn tendency to spend money."
Kamenetz points to student loans as chief among the reasons that the next generation is saddled with debt, noting that access to post secondary education, as well as the credit markets to pay the hefty tuition bills, is more accessible than ever. After signing off on five figures of debt, big banks then capitalize by offering high limit credit cards to young people who are not financially educated.
Counteracting the Problem
CUs can counteract the debt problem by stepping up their own student lending efforts and establishing strong relationships with Generation Y on campus. Offering lower limit, lower interest credit cards can also play a key role in smoothing the adjustment period for students from living off parents to using their own money without digging a hole of debt.
"It's really a matter of capitalizing on your strengths, just making sure people are aware of your non-profit status and offering products that are more consumer-friendly," said Kamenetz.
Reaching out on college campuses and in communities with indirect marketing efforts are the best ways to access this market, Kamenetz argued, noting that Generation Y tends to ignore direct mailings and phone calls and gravitate instead to less invasive messages through social media outlets and financial education campaigns.
In the report, Kamenetz points to Dayton, Ohio-based Wright-Patt Credit Union as a prime example of how to market to the millennials without slamming the message over their heads. WPCU offers private loans but pushes its young members to pursue scholarships, grants and cheaper federal loans before coming to the credit union for a Student Choice Loan. The younger generation "sees right through" direct marketing efforts and discards them, but an institution that makes an effort to prove its honest and that it is on their side will win their business for years to come.
"Understanding this generation is going to pay off because they're going to be your best members over the next 10, 15 to 20 years," Kamenetz noted. "Be honest with what you do well and why you're a trustworthy source."
'Bank' As A Bad Word
While homeowners have felt the pain of declining property values, students have also been pinched by the credit crunch as they have seen their scholarships shrivel up and their loans either disappear or become very unfavorable.
"There is a huge lack of trust and the very idea of a bank can be a bad word at times," said Kamenetz. "A lot of young people are learning the hard way."
