New Help for the Millennial Money Dilemma

Media coverage of America's massive Millennial generation can make them sound like Martians who just landed on the planet or a new species recently cracked out of its pods. In fact, according to a recent survey of 1,010 Americans (80% of them Millennials aged 21-34), the nation's youngest adults have remarkably traditional goals. 

That was the most surprising conclusion of the 2017 Bank of the West Millennial Study, an in-depth look at what Millennials want and what they're doing to attain it. Bank of the West recently visited Investopedia to talk about the survey and some new initiatives that reflect some of of its findings.

Almost identical to Generation X (age 35-51) and only somewhat less than the Baby Boomers (age 52-70), Millennials see the top elements of the American dream as:

• Being happy (Millennials 70%/Gen X 70%/Boomers 80%),
• Owning a home (60%/62%/69%)
• Being debt-free (55%/56%/66%) 
• Retiring comfortably (51%/57%/67%)

What's more, six in 10 of the respondents in the survey see the dream as either still attainable (56%) or say they've already attained it (5%). 

"What surprised me the most was the level of optimism of this generation," says Paul Appleton, executive vice president, products and payment solutions at Bank of the West. "Eighty-five percent are confident that they will attain their American Dream. And two-thirds believe that they have more opportunity than their parents to be successful."

What Millennials don't have: the kind of job stability and benefits many members of earlier generations enjoyed. A growing number are part of the gig economy instead of holding permanent jobs. And pretty much everyone lacks the defined-benefit pensions that even most Boomers have missed out on. As Appleton points out, 17% of Millennials work part- rather than full-time, not because they want to but because that's how the job market is in many places. 

Millennials are far more home-and-family oriented than people think, the survey found. After travel (46%), what they're saving for most is to buy a home (38%). That's especially striking because 43% of the respondents already own one.

Given the chance to move, 80% would move closer to family. Given a choice between a rich professional life and a rich family life, 78% choose family. 

Not surprising for a generation that came of age with the Great Recession of 2007-2009, Millennials are not big risk-takers. Quit a job without having another one lined up? No way, say 79% of Millennials. Move to a new city without lining up a job first? Not me, add 62%. Older generations are also cautious, but they're more likely to be tied down than young adults.

That caution spills over into how Millennials handle finances. A startling 76% keep their money either in their checking/savings accounts (64%) or in cash (12%). Only 24% invest their money – either on their own (17%) or with the help of an advisor or robo-advisor (7%). It's likely that the stock market crash is a more powerful memory than its more recent rise.

And, although they want to achieve the American Dream, only 49% of Millennials have a financial plan to do so. 

In short, Millennials need some help reaching their goals. "The survey and other research we've done on Millennials have shown they need three things," says Eileen Loustau, senior vice president, head of segment strategy for Bank of the West. "They want help with budgeting, they need to move from being a saver to an investor, and they would like a lot of apps and tools to help them save." The bank is looking at setting up an information desk where Millennial-age bank employees would be available in branches to help their peers and others with financial questions.

Meantime, to help the gig-economy generation – especially those socked with high banking fees because their paychecks don't come with direct deposit – the Bank just launched a new checking account called "Any Deposit Checking" in all 19 states where it has branches. This allows individuals to open a full-service account with no minimum balance or direct deposit required, and no monthly fee as long as a monthly deposit (no minimum size) is made. For customers under 25, the monthly service charge ($10) is waived automatically, even without a deposit.

"We know that 18% of employees don't have access to direct deposit," says Appleton. "This account will give them access to a full-service branch and a debit card,"  He also pointed out that opening the account won't require a credit rating – another barrier for some Millennials just beginning their financial lives.

Nearly 6 in 10 Millennials haven't yet bought a home, the goal that's #2 on their generation's  American Dream list. While about two-thirds of the non-homeowners follow that option for various other reasons, a third say the only reason they haven't bought is that "it's too expensive." 

An expensive housing market is an especially big barrier these days, Appleton explains. Most lenders require borrowers to have 20% of the price of the home as a down payment, which is especially difficult in high-cost-of-living cities, such as San Francisco, where Bank of the West is based. The bank recently launched a  mortgage-lending program that requires only 10% down to get a mortgage without needing the private mortgage insurance usually required of those who don't make the 20% mark. The financing is a little complicated – a mortgage on 80% and a home-equity loan for the other 10% – but it offers borrowers with good credit scores but less-than-optimum cash a chance to finally buy a home. "The study showed how we needed to learn to approach mortgage lending differently," says Appleton.

Millennials have notably traditional goals, but they need new solutions for today's economic environment. Banks competing with other types of financial services companies for their attention and business will need to find new ways to step forward. Bank of the West's research provides new directions for financial services to explore – and useful questions for individuals to ask about their own financial planning.

For more on this topic, read Millennials: Finances, Investing & Retirement and The Biggest Financial Mistakes Millennials Make.