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Over the next two decades, the U.S. will experience an unprecedented generational transition of wealth. The aging Baby Boomer generation is expected to transfer $30 trillion of inheritance to Generation X and Millennials. This historic transition of wealth and buying power is also ushering in shifting perspectives around debt, money, and investing. As such, it's imperative credit unions harness this knowledge to tailor how and what services they deliver to their members. Let's take a closer look at generational trends and how credit unions can use these trends to unlock a superior credit union member experience.
At-a-Glance generational snapshot of your members
- Baby Boomers: Born between 1946 and 1964, there are an estimated 70.68 million Baby Boomers currently in the U.S. According to the Federal Reserve, they have a reported average net worth of $1,066,000 with a median net worth of $224,000.
- Generation X: Born between 1965 and 1980, there are approximately 64.95 million Gen Xers in the U.S. With a net worth of around $288,700, Gen Xers have a median net worth of $224,000, according to the Federal Reserve.
- Millennials: Also known as Generation Y, Millennials were born between 1981 and 1996. In total, there are approximately 72.26 million Millennials in the U.S. According to the Federal Reserve, they have an estimated average net worth of about $76,200 with a median net worth that lingers at around $11,100.
- Generation Z: Gen Zers were born between 1997 and 2012. There are approximately 67.06 million Gen Zers in the U.S. Because this cohort hasn't fully entered adulthood and doesn't have careers yet, it's difficult to report on their net worth projections.
Who are the Baby Boomers?
Shaped by the Cold War, Post WWII optimism and the hippie movement, Baby Boomers were the largest generational group in the history of the U.S.—before being surpassed by Millennials. While they're the largest consumers of traditional media, such as magazines, radio, newspapers, and TV, Baby Boomers are adopting new technology at a rapid pace. For instance, while only 25% had smartphones in 2011, the rate of adoption jumped to 68% in 2019, according to Pew Research.
Banking Habits
When it comes to financial and banking habits, Boomers value face-to-face contact and relationship building associated with branch transactions. They may even still write checks and use cash for smaller purchases.
Unique Financial Concerns for Baby Boomers
Surprisingly, Baby Boomers are experiencing the highest growth in student loan debt. This can be attributed to late-career changes that required more education or having taken loans out to help finance a grandchild's or a child's education. And these student loans also tend to carry a higher interest rate.
Baby Boomers have an average student loan balance of $58,300 with an interest rate of 5.9%. This equates to an average monthly payment of $620. Another key concern for Baby Boomers is the potential for outliving their retirement fund.
Who is Generation X?
Shaped by the rise of personal computing and the end of the Cold War, Generation X cohorts are sandwiched between two gargantuan generations—Baby Boomers and Millennials. As such, Generation X members often demonstrate attributes of both. While they may still watch TV, read magazines, newspapers, and listen to the radio, Gen Xers are very digitally savvy and connected. They tend to spend an average of 7 hours a week on Facebook, which is the most of any generation.
Gen Xers Banking Habits
Because Generation X cohorts are digitally savvy, they are comfortable with online banking and banking through a mobile app. Even so, they still prefer the traditional brick-and-mortar banking experience, which means conducting transactions in person. As the largest generational earners, the average Gen Xer boasts an impressive $125,560 between retirement funds and bank accounts. Although they only constitute 25% of the population, they're responsible for 31% of wealth creation.
Unique Financial Concerns For Gen X
Aptly named the sandwich generation, Gen Xers are often responsible for caring for two other generations: their Gen Z/Millennial children and their Baby Boomer parents. As such, it doesn't come as a surprise that this generation carries the highest amount of credit card debt. Outside of mortgage debt, the average Gen Xer carries around $39,000 in debt.
Because they have had to help their parents review finances, it has prompted many Gen Xers to review their own situation. When this reality is combined with their heightened tendency to research, Generation X is largely financially savvy. Most importantly, they know where the financial literacy shortcomings lie, which is a gap credit unions have the opportunity to fill.
A Closer Look at Millennials
As the largest generation, Millennials were shaped by the technological explosion, the Great Recession, the horrendous 9/11, and social media. They are exceptionally comfortable with technology, particularly mobile devices. Even so, 32% of Millennials still rely on the traditional computer or laptop to make purchases. When it comes to media consumption, surprisingly 95% of Millennials still watch TV—but not in the traditional broadcast TV sense. This cohort favors cutting the cord and utilizing popular on-demand streaming services over traditional TV, which is indicative of their larger, "I want it when I want it" perspective.
Millennial Banking Habits You Can Bank On
Millennials are driving trends throughout the banking industry with their love and fast adoption of technology. With less brand loyalty than previous generations, they tend to trust brands and financial institutions with an excellent product history. Millennials expect robust digital tools to help them manage their debt, as well as 24/7 self-service options. In addition, they rely heavily on peer and social reviews to make decisions.
The Millennial Financial Outlook
Although they are powering today's workforce, 14.8 million Millennials carry student loan debt, which is more than any other generation. The average Millennial with student loan debt carries about $46,400 with a monthly payment of $510. Because Millennials earn less than Generation X, the impact of student loan debt is amplified.
So much so, Millennials often delay major purchases, such as homes and weddings. However, 2019 Morgan Stanley research suggests that Millennials are the largest drivers of net new loan demand and will continue over the next eight years.
What is Gen Z Like?
As the younger siblings of Millennials, most of Generation Z grew up playing on the mobile phones, smartphones, and tablets of their parents. In fact, the average Gen Zer received their first mobile phone when they were around 10. This cohort is also referred to as Post-millennials or the iGeneration.
Generation Z members consume large amounts of video content everyday. Simultaneously, they are very interested in environmental issues as well as gender, racial, and income equality based on research from Adweek. This valuable Generation Z insight creates a unique opportunity for credit unions to positively position themselves in the hearts and minds of this growing generation.
Generation Z's Banking Preferences and Habits
After watching the financial struggles of Millennials, Gen Z cohorts take a more fiscally conservative approach to their finances. They work to avoid debt and greatly appreciate solutions that help them achieve this goal, such as debit cards and savings solutions. Generation Z represents the credit union's greatest opportunity for new account holders.
The Gen Z Financial Outlook
Currently aged between 9 and 24, Generation Z cohorts are just starting to learn about personal finance. They do have a very strong appetite for financial education. In fact, members of this generation are opening savings accounts at younger ages compared to previous generations.
Cross-Generational banking trends credit unions should know
While each generation may have distinct preferences, wants, and needs, there are important intersectional trends. For instance, an Adobe Analytics study discovered that 31% of Millennials and 44% of Generation Z have utilized a banking chatbot to answer their questions. Both reported this experience was superior to talking to a real person.
Yet, when it comes to more complicated banking tasks, they prefer the human touch of a live rep, which is the same as older generations. It's important to know that when Millennials are dissatisfied with their financial institution, they are 2.5 times more likely than Baby Boomers and 1.5 times more likely than Generation X cohorts to switch financial institutions.
Looking to keep all credit union members happy? Implementing a robust cybersecurity program is a great place to start. Security concerns were ranked at the top of the list for all generations. Although Baby Boomers and Generation Z members ranked "branch locations" as the second most important, "reputation" ranked second for Millennial and Gen Z consumers. Another important trend is that the COVID-19 pandemic has created a new tidal wave of digital bankers. Based on a Zelle survey, 82% of seniors who are 55 and older are banking online more frequently. Among those, 61% are turning to social media more often and 55% are turning to mobile banking more frequently as well.
FLEX helps credit unions meet the needs of all generations
At FLEX, our core technology empowers CUs to efficiently meet the needs of each generation in a hyper-personalized way. With a focus on member services in the digital age, we help credit unions create exceptional member experiences at every touchpoint. To help you best service all of your members--regardless of which generation they are--check out our guide to Member Services.
