It’s nearly Memorial Day in the US, and thousands of students are preparing for a variety of summertime and lifetime adventures. But millennials may have a unique set of financial challenges before them. According to a recent TIME article, “today’s young adults are clueless when it comes to knowledge of their credit.”
The article discusses a recent Consumer Federation of America study showing that millennials have an extremely poor knowledge of how their consumer credit scores affect their lives and pocketbooks, including in business transactions with cell phone companies, credit card issuers and mortgage lenders. For instance, most individuals surveyed didn’t realize that a low credit score could cost them as much as an extra $5,000 over the life of an automobile loan.
My colleague Fredric Huynh recently posted a great article about the credit risk trends of young adults. In it, he notes that this generation's attitude toward credit may be changing and cites research that backs this up, such as how young consumers are not searching for credit as aggressively. He also mentions how the underlying rules of the CARD Act may be making it harder for consumers under 21 to get credit – and thus, begin building positive credit histories – unless they can show an ability to repay or obtain a co-signer.
We clearly have a mix of issues to address – educational, attitudinal and legislative – in order to ensure young consumers are building sound financial futures. As I've argued before (as have many of my fellow bloggers), the banking industry must play a role by initiating and promoting financial education efforts, including anti-fraud and credit education. It’s in our best interest, after all. Not only will you be investing in the development of long-term banking relationships, a knowledgeable consumer can also be a key ally in your fight against fraud.
Here are some suggestions for drawing young customers into your circle of knowledge:
- Go where the millennials go. There are unlimited possibilities for staging incredibly powerful – and entertaining – fraud and credit education messaging via social networking websites like Twitter and Facebook. Even a simple credit health, fraud or identity theft “tip of the day” to followers can be effective.
- Give “Generation Like” a reason to respond. Consider featuring small incentives to your online followers who correctly answer knowledge-based credit health or fraud questions. The idea here is to give a little in exchange for that all too valuable “Like.”
- Leverage the latest in technology. And when you do – whether it’s offering an educational app or podcast, a security notification feature, or free FICO® Scores to consumers – you should be shouting (and tweeting) about it online.
- This is just a start…as always, share your own ideas in our comments section!
This is a time for our young graduates to shine and reflect on their recent accomplishments. And it’s time for us to stand beside them, and support them, as they look forward into their financial futures.