It’s not a new phenomenon to have employees in their 20s and their 60s working together.
However, it could be argued that the differences in life experiences, values and attitudes of these generations have never been so different. And at the same time as millennials are on track to make up half of the workforce in just two years’ time, baby boomers are putting off retirement, with many staying in work past the age of 65.
While generational diversity means a broad range of talent in the workplace, leaders need to be conscious of the circumstances of each age group. Different generations not only bring different life experience and attitudes to work, but also a different approach to finances.
So how will employers play a part in the financial wellbeing of the growing millennial workforce, whose finances are so different from those of the generations preceding them?
The changing workforce
Millennials have joined a workforce that’s incredibly different to the one their boomer colleagues started their careers in. Over the last few decades, the ideas of a ‘job for life’ and a ‘conventional career path’ have become increasingly irrelevant. Workers are more transient and adaptable than ever before, and the rise of the gig economy has seen freelancing and zero hour contracts become more widespread.
It’s worth bearing in mind that millennials’ job-hopping isn’t always by choice – often, it’s a product of the job market they’re subject to. While about a third of this generation consider themselves part of the ‘gig economy’, a quarter of them have been laid off and nearly half anticipate needing a second job or additional income at some point in their life.
Just as we now look at career paths differently, employers are beginning to treat the finances of their employees differently. Leaders are becoming increasingly aware of how poor financial wellbeing can make their staff less productive and harm their wellbeing.
We know that 44% of employees are worrying about money while at work, and the average millennial spends four working hours a week dealing with their personal finances. It’s clear from these numbers that if employers can help millennials manage their money more effectively, they can reap the productivity benefits.
Who are millennials?
They’re predicted to make up half of the workforce by 2020, but what is a millennial – and what do their finances look like? There’s some debate about the official parameters, but Pew Research Center says millennials are those aged between 22 and 36 in 2018.
This age group has come of age during difficult economic times: a report released by the Resolution Foundation earlier this year showed a real reversal of fortunes for young people in Britain. While the 20th century was marked by generation-on-generation increases in home ownership rates and household income among young people, this has failed to materialise in the 21st century.
There are pervasive and patronising stereotypes that we all know about millennials – they’re materialistic, self-indulgent and frivolous, with a ‘you only live once’ attitude towards money. Not only is this image at odds with their actual spending habits, but research shows that even millennials themselves believe these trite stereotypes about their own generation.
Millennial money vs. boomer budgets
Researchers believe that coming of age during the Global Financial Crisis and seeing its huge impact on the work and finances of their parents has made millennials far from frivolous. Although they do feel pressure to keep up with the spending of their peers, they have less access to credit in a post-recession world so actually have reduced consumer debt. Investopedia reports that “a surprising number of Millennials actually live within their means”, despite their low level of overall financial literacy.
Millennials in the UK are also affected by an eye-watering level of student debt. With the price of a university education continuing to climb, the average student in the UK now graduates owing £34,800, a sum that accrues interest at a rate of 6.1%.
This level of educational debt affects young people’s ability to save for a first home or retirement compared to their older colleagues who enjoyed free education. And although their degrees were costly, 40% of millennials believe that university didn’t prepare them for the real world – many would’ve liked to receive more education on financial issues like investment, taxes and managing their day-to-day expenses.
Unaffordable housing also affects millennials’ financial positions. “Unprecedented wage stagnation” and an increase in the salary required to buy property mean home ownership is an increasingly unrealistic prospect for many young people. The Resolution Foundation believes that a third of this generation will never own their own homes, and many are still living with their parents.
Millennials have also grown up being told that they won’t be able to retire on state pensions, so will need to fund their own retirements. However, many feel they don’t have the tools to plan for this effectively, and of course retirement is further away for younger workers. Although paying off student debt takes precedence over retirement savings for many, auto-enrolment in pensions does mean most young people are saving something for later life – albeit a small amount.
This demographic also looks at the job market differently. Although pay will always be important to jobseekers, younger workers are often looking for autonomy, respect and fairness in a new position. Many also use their digital skills to ascertain what their peers and superiors are earning, making them more in tune with their own market value.
Although they aren’t particularly optimistic about their finances – with 57% expressing significant doubts about the economy – millennials do want professional support to manage their financial futures. Nearly half want their employers to use financial experts to provide training and education, and want this training to be tailored to specific age groups.
What can employers do for millennial staff?
Many corporate wellbeing programmes now include a financial component. We know that “financial stresses go hand-in-hand with reduced mental health and wellbeing”, and when employees are in poor financial situations their work is likely to suffer. A study by Bank of America Merrill Lynch has confirmed that employers who support their employees’ financial wellbeing are better positioned to “build more loyal and productive workforces”.
However, it’s becoming increasingly clear that a one-size-fits-all approach to financial wellbeing is unlikely to hit the mark for the specific needs of any age group. A financial wellbeing package that offers choices for different life stages is more likely to deliver results than a narrow or rigid offering. Among the financial issues that millennials want their employer to provide support on, the most popular are investing, taxes, saving for a home and managing student loans.
Ensure your benefits package can provide value for millennials as well as your older workers, considering their stage of life, debt levels and attitudes to money. Recognise that younger workers have less of a safety net and face different financial challenges than their parents did.
Some institutions are offering preferential mortgages to help staff onto the property ladder. As compelling as this offering will be for many, we know that home ownership among millennials in the UK is half that of baby boomers when they were the same age. Rental deposit loan schemes like Co-op’s are likely to be more appealing to members of ‘Generation Rent’ – this programme allows staff to take an interest-free loan for rental deposits and pay it back over several months.
Similarly, your baby boomer staff might be comfortable with their pension outlook, but workers in their 20s might be grateful for some expert insight into saving for their retirement. In fact, nearly half of millennials say they’d like help managing their retirement savings.
Having grown up online, millennials are comfortable filtering information and drawing their own conclusions, and 70% of them say they’d like financial advice to be delivered digitally. And consider not only the platforms you use to deliver financial wellbeing to your people, but also tone of voice. Many millennials are put off by overly formal information, so avoid jargon and use technical language sparingly. Enable your millennial staff to make their own decisions on their financial wellbeing, rather than giving them a single option.
Finally, approach financial wellbeing in a way that recognises different needs among different demographics. Creating a tailored financial wellbeing programme that’s appropriate for the growing millennial segment of your workforce will have a range of benefits.