September 2014

Marketing Financial Products to Millennials

By Richard C. Pretty and Jonathan Gentry

Millennials, also known as Generation Y, are currently in their 20s through early 30s. Comprised of approximately 79 million members, Gen Y is the largest generation in U.S. history. Projections show that millennials will make up 50 percent of the U.S. workforce by 2020.1 (See Figure 1.)

Figure 1
demographic shift

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Clearly, millennials represent a sizable market for financial products. But because of their relative youth and other factors, millennials tend not to be naturally drawn to financial products, and engaging them in retirement planning, life insurance planning and other long-term financial concerns can be a considerable challenge. To bring millennials to the table, you need to keenly understand who they are, their attitudes, their perceptions and behaviors surrounding personal finance, and their communication preferences. Understanding their unique circumstances can help you tailor your marketing strategy accordingly.

Financial Challenges and Wariness about Financial Systems
With higher levels of unemployment (11 percent) and underemployment (53 percent) than prior generations, millennials are facing one of the worst job markets in decades.2

They are carrying record levels of student loan debt; the average 2012 graduate accumulated more than$29,400 in student loan debt, with debt increasing 6 percent per year from 2008 to 2012. Overall, 71 percent of students graduated carrying some student loan debt.3 (See Figure 2.)

Figure 2

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Millennials have seen their parents and other individuals from prior generations face their own financial hardships, particularly in the form of job losses and diminished savings in the wake of the economic recession of 2007 to 2009 and the stock market crash of 2008 and 2009.

Given the precarious economic climate in which they've come of age, it may not be surprising that millennials are reticent about investing and wary of financial systems in general. They are generally financially cautious—saving what little money they can while delaying life milestones. Although they do not save a high percentage of their income, they place a high priority on having savings, with 86 percent in one survey viewing savings as part of their "definition of success."4 Their average credit card debt is down 30 percent since 2007.5

Millennials are also postponing life events such as establishing a household. Among millennials who complete an undergraduate degree, 45 percent choose to live with their parents while looking for and securing a job and establishing a financial footing; this figure is up from 31 percent a decade ago. Millennials are waiting longer to wed, with the median age at which Americans enter their first marriage at its highest level in modern history—29 for men and 27 for women.6 The homeownership rate for 25- to 34-year-olds is 37 percent, down sharply from 47 percent pre-recession.7

Guardedness about money matters aside, millennials are nearly on par with their elders in terms of financial literacy, as evidenced by the chart, shown in Figure 3, showing results of the TIAA-CREF Financial IQ Quiz.

Figure 3

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The “Digital Generation”
Technology plays a central role in millennials' lives. Gen Y is the first "digital generation," raised on mobile phones, laptop computers, tablets and other forms of rapidly advancing technology that are changing the way people interact and conduct business. New technology has influenced where and how Gen Y gets information; for example, television and the Internet, not print media, are the generation's primary sources for news.8 In the United States, millennials spend an average 25 hours a week online, including eight hours on social media.9

Gen Y is accustomed to constant communication and immediate response. This helps make millennials highly productive, but can also put them out of touch with older colleagues. At the same time,global interconnectedness, made more possible with Gen Y technology, has made this generation increasingly reliant on peers for information and motivation.

Reaching Millennials
Given the defining characteristics of millennials as discussed above, what are the keys to engaging Gen Y in your marketing efforts? Any program to market financial products to millennials will be more likely to achieve success if you follow the general guidelines outlined below.

Address Present-Day Needs First
Millennials aren't likely to be particularly receptive to, or in immediate need of, guidance on planning for long-term goals like retirement, especially if they have little disposable income available to save for the future. Before they even start thinking about goals that may be 30 to 40 years away, millennials need to address more pressing money concerns, like paying bills and coping with student loans and credit card debt. When marketing to millennials, your initial objective should be to assist millennials in these areas and offer direction on budgeting, debt management, setting up an emergency fund, and, if relevant to the client, saving for marriage or a first home.

With millennials waiting longer than prior generations to marry and buy a first home, their need for life insurance is an important concern, but generally not as near-term as it was for previous generations. Marketing should address present-day concerns first before moving on to assessing life insurance need. It's a different situation for married or homeowner millennials or those who provide financial support to a loved one; these individuals should include assessing life insurance need as a near-term financial priority.

Once a millennial’s near-term needs are met, a financial provider can and should proceed to a discussion of long-term planning and investing for retirement. Any retirement savings plan participant should contribute at least enough to take full advantage of any employer match included in the plan. Too few millennials are participating in their workplace retirement savings plan, and 58 percent of those who are participating were enrolled automatically.10 Often, automatic enrollment means the participant'ssavings go into a default investment, unless the participant makes investment decisions based on his or her specific objectives for risk and return. For example, many millennials signing up for a TIAA-CREF workplace retirement plan passively use the plan’s default investment option. If the default option is a lifecycle fund with an asset allocation targeted to the investor’s age that may not be problematic in the long run. However, many plans still use a money market fund as their default investment, which likely will not provide enough investment growth to ensure retirement readiness for young savers.

Invest in Digital Communication
To engage millennials, you need to meet them where they are, which is often in the digital world. Intuitive, easy-to-use, and highly interactive Web-based applications are key to a successful effort to market financial products to Gen Y. For example, much can be learned from innovative, online account aggregators that allow users to track all their money from one place on the Web and offer comparative data and products that are tailored to the user's unique financial needs.

Understand the Benefits and Limitations of Social Media
Millennials are accustomed to, and comfortable with, using social media sites like Facebook, Instagram, Twitter and Snapchat as communication tools and information sources. Such sites, rather than Web tools currently being used by the financial services industry to target more general audiences, should serve as benchmarks on how to connect with millennials via digital communication. Remember though, that millennials still spend a considerable amount of time outside the digital realm, and social media sources have limitations as communication tools. To truly engage millennials, you need to offer them both digital and real-life experiences.

Explore Peer-to-Peer Mentoring and Parental Influence
Many millennials rely on their peers and parents for financial advice. In certain instances, mentoring by peers who are trained and supervised by financial professionals can be an effective way to engage millennials. Similarly, parental influence can be leveraged as a tool for connecting with millennials.

For example, providing your baby boomer clients with tools, guidance and resources to support their money conversations with their millennial children can be a good start. And, leverage the relationship with your older clients as a way to encourage their children—for example, encourage parents of younger adults to tee-up these conversations with their children and suggest the parents accompany their children to an advice session.

Restore Confidence in Investing
The stock market downturn of the last decade is still fresh in the minds of millennials. Investment education is critical to helping millennials feel confident about investing and understand the importance of asset allocation and diversification in targeting a given return while managing risk.

As the largest generation in U.S. history has begun entering their working and consuming years, Gen Y or the millennials, offer both opportunities and challenges to firms that market financial products and services. Despite the unique challenges they face compared with prior generations, millennials are likely to welcome opportunities to explore financial products—but only if the marketing of those products reflects the both the immediate and unique concerns, needs and communication preferences of these young consumers.

Richard Pretty, FSA, MAAA, is senior managing director and head product actuary for TIAA-CREF. Jonathan Gentry is senior director of segment marketing for TIAA-CREF.

The material is for informational purposes only and should not be regarded as a recommendation or an offer to buy or sell any product or service to which this information may relate. Certain products and services may not be available to all entities or persons. Past performance does not guarantee future results.

TIAA-CREF Individual & Institutional Services, LLC and Teachers Personal Investors Services, Inc., members FINRA, distribute securities products.

© 2014 Teachers Insurance and Annuity Association of America-College RetirementEquities Fund (TIAA-CREF), 730 Third Avenue, New York, NY 10017


1 U.S. Bureau of Labor Statistics.
2 The Atlantic, 2012.
3 Project on Student Debt, 2013.
4 The Futures Company, 2012.
5 FICO analysis, January 2013.
6 Pew Research, 2013.
7 U.S. Census Bureau, 2011.
8 TIAA-CREF Institute, College-Educated Millennials: An Overview of Their Personal Finances.
9 WSL/Strategic Retail study, 2012.
10 TIAA-CREF Customer Insights, 2013.