Are you COOL Enough for Gen Y and its Potential?

May 5, 2005

There's a new generation coming along that, at 71 million strong, is nearly as large as the 76 million baby boomers now nearing retirement. Known as Generation Y, this new group was born between 1977 and 1995. To attract this generation, credit unions will need to develop products and services such as intergenerational mortgage products and automatic deduction for savings and investments, according to a new Filene Research Institute report entitled "COOL Solutions for Gen Y: A Guide for Credit Unions."

Generation Y members are Internet savvy, using the Web for research and to gather information, yet they have a strong preference for personal contact when making financial decisions.

These young people have spending power, although many are still at home with their parents. A 2003 Harris Interactive survey found that this generation's largest component (born between 1982 and 1995) has annual income of $211 billion, spending $172 billion a year and saving $39 billion.

It'll be worth paying attention to them. CUNA analysts predict that the average credit union will lose $14 million in loans over the next 10 years if it doesn't increase penetration among 18-to-24-year-olds. With decreasing loan opportunities and tighter spreads, that's a huge amount of money that a credit union can't afford to watch go out the door.

Be There for the Firsts

Investing in serving this young group now will pay significant dividends when marketing core financial products in the future. Consider, for instance, all the first-time financial purchases and decisions that these young men and women make: their first car, first "real" job, first credit card, marriage, and their first home purchase.

Credit unions will need to innovate to reach this group. For example, one credit union mortgage strategy is an intergenerational mortgage product to allow first-time homebuyers to overcome the challenge of saving a large down payment. Instead of plunking down an outright gift to the young adult or couple, parents or grandparents can retain their assets while using them to help with a down payment. An intergenerational mortgage program might take several forms: It could be a home equity loan secured by the parents' property, a share-secured loan on the parents' share certificate, or an agreement by the parents to pay a portion of the monthly payment over a specified period.

Automatic Deductions

Gen Y members also are receptive to automatic account deductions for savings and investment. They trust the technology and appreciate the convenience. They know it takes patience and discipline to grow their money.

But credit unions need to make sure deductions are simple to set up and maintain for this generation, because they're used to getting services quickly and easily. If you confound them with red tape, Generation Y will move on, and you'll be left to ask "Why?"

Another good source is Case Study 2, presented on March 19 at the 2005 annual conference. The paper is titled “Generation Y: Reaching the Young Adult Market,” by Cindy Morgan and Bryan Sims. The presentation can be downloaded at http://www.cunamarketingcouncil.org/events/conf05/conf05presentations.html.

Mark Meyer is director of innovation at the Filene Research Institute (www.filene.org). This story first appeared in CUNA Mutual Group’s online publication called Added Dimensions at http://www.cunamutual.com/cmg/addedDimensions/home/0,1775,9057,00.html and is reprinted with permission.

Post this page to:

Comments