Creditors and businesses marketing to millennials need to understand that their relationship with cash, credit and debt is drastically different than boomers or generation X. The millennial generation went to high school or otherwise entered the workforce being told they needed a college degree to succeed in life. After all, that's how two generations before them ventured into adulthood. Students borrowed money with the promise of a great career and life. Then, there was a recession...
Millennials are charting a new course when it comes to managing Debt.
College and the Workforce
With so much emphasis on earning high paying degrees, many millennials started their young adult lives in debt. Student loans are at an all time high and a college degree was supposed to lead to careers with the promise of a healthy retirement. During that time, the U.S. economy was dealt a blow with the housing crisis and many traditional employers filing for bankruptcy, laying off employees or otherwise outsourcing jobs. Millennials did move into the workforce but those who didn't finish their degrees were unable to earn what they'd hoped would cover their student debt and other finances. Pew Research Center estimated in 2016 that 15% of young adults were living back home with their families. They may have moved out initially, but because of lower-than-expected wages, debt and other personal finance challenges, they "boomeranged" back home.
Credit and Debt
Business Insider recently reported that of the $3.6 trillion in consumer debt, millennials are estimated to hold $1.1 trillion. While some of the debt is from student loans, young adults also owe for auto-loans (including leasing), medical debt, and credit cards. Most millennials weren't taught how to handle finances and therefore feel unprepared for things like credit card offers or signing a lease for an apartment. In fact, most American consumers feel powerless when it comes to dealing with debt collectors, especially if they are unaware of their consumer rights.
A recent survey revealed the following about money management and millennials:
- 39% feel stressed out about debt
- Less than 20% feel they understand financial options, including how to repay student loans
- Nearly 30% feel unprepared or ill-informed on budgeting or handling credit
- Credit card and student debt holds them back from making major purchases (such as a home) and decisions (such as starting a family)
Millennials are also choosing to focus more on experiences, rather than expensive items, such as a new home or car. Simply put, to the millennial, the value of spending money is more important that owning things.
See also: The Latest on Student Debt in America
Collecting from Young Adults
Creditors or collection agencies will be more successful collecting from millennials if they understand the challenges they're facing. Part of working with any consumer should involve education and offering information on their rights. When young adults are putting themselves deeper into debt to build their future and they are unaware of the options regarding repayment, they will likely default due to the unfamiliarity of budgeting, debt collections, and managing daily finances. Enlightening the young debtor and working with them will help recover past-due accounts and rebuild their credit, leading them to a brighter future.