Convincing Young Adults to Stake Retirement Plans Is a Hard Sell
It's not that the inclination isn't there; other life matters simply take priority for those in the 18-30 age range, said Kris Wickline, consumer program manager at CUNA Mutual Group, who helps credit unions attract and retain members of Generation Y through strategic marketing of customized products and services.
"It's harder for Gen Y to think about retirement, but they are extremely interested in building wealth," Wickline said. "Gen Y's participation in 401ks is a little more than one quarter. Contribution levels rise in the 30s, and most people don't truly become interested in retirement until their 40s or 50s when they can conceptualize a retirement date."
Some of the reasons Gen Yers may not be as focused on their golden years include the burden of student loans or credit card debt. Wickline said this group has more debt at their age than previous generations. Others have more immediate, short-term goals such as saving for a car or home. In the middle of it all, there is a lack of money management skills that show options on how young adults can save for retirement.
For credit unions, most would agree that the industry has struggled to attract Gen Y. But to ignore them could be detrimental, Wickline warned. According to a 2006 survey, they make up one-fourth of the U.S. population. As older credit unions members have aged, the industry has seen a 17% drop in peak borrowers since 1985. By 2015, Gen Yers' total annual income will surpass the $500 million mark.
"The important thing is [credit unions] can't wait," Wickline said. "There still needs to be an urgency. If they wait five years, they won't have established relationships. Instead of thinking about product focus, think about consumer mindset."
Wickline said the first mindset to consider is building self-esteem by encouraging Gen Yers "they can be anything they want." These young adults play hard but also work hard. They also like to be recognized for their efforts. Credit unions can help boost self-esteem by offering student loans to attend "the college of their dreams" or saving for that dream car.
By taking on a variety of mindsets, it may help open the door to retirement products and services. Wickline acknowledged that it may be a hard sell to get an 18-year old to think about saving for retirement and certain products have traditionally been sparse among young adults. Case in point: only 12% of Generation Y own individual retirement accounts, according to the most current data, she said. But all is not lost. Credit unions should ask if their products, including IRAs, fit the goals of Gen Yers who have a much longer investment horizon. Can they open an IRA online quickly and easily and can a marketing plan be tailored with messages that would appeal to young people?
"One should also keep in mind that with young adults switching jobs on average every 18 months, those who do have 401(k)s will be looking for rollovers," Wickline said. "Are [credit unions] poised to target and capture these from young adults?"
Wickline said she is aware of several credit unions that offer IRA "accumulators" for those who don't have the minimum required to open an account-"something a young adult may struggle with."
Wickline said she is encouraged about efforts from credit unions like Oklahoma-based Tinker Federal Credit Union, which launched www.BuckTheNorm.com (CU Times, Nov. 28, 2008). Geared at Gen Y, the site offers a plethora of resources to help them with money management. The interactive Web site features blogs, financial personality quizzes, and video contests with the goal of presenting budgeting and debt management skills. The Austin, Texas-based Amplify Federal Credit Union offers Money Tracker, which integrates money management with online banking.
"The question becomes one of understanding the barriers for young adults when it comes to savings and investments and understanding what credit unions can do to help remove those barriers."