Robinhood –– The uber-successful trading app…
Has revolutionized the world of stock and options trading for a generation so large, they simply can’t be ignored.
This app was built to get millennials, many of which were first-time traders, into the stock market.
And it worked.
They now have 10 million+ users and are valued at over $8 billion.
The Acorns app followed the same path as Robinhood.
Focusing on the millennial generation’s inability (lack of interest) to save for retirement –– allowing them to “round up” and invest their spare change.
They now have nearly 7 million users and are rapidly approaching a $1 billion valuation.
But when it comes to addressing the short-term saving habits of millennials…
We believe they’re well on their way to becoming the next household name in the financial tech space… and luckily…
What are the underlying reasons for such disparity in millennials’ ability to save? Just how big do we see this opportunity being?
A Generation With Different Priorities
Many of us are aware of the shocking statistics regarding Millennials and their finances. They aren’t saving as much as previous generations, don’t make as much as their parents did, and are crippled by student loans.
While they may face some challenges economically, one of the biggest factors shaping this generation is a different set of priorities. When they save, they do so for short-term goals and experiences rather than retirement or home-ownership. And when they do invest and save, they overwhelmingly like to use modern, digital tools and apps to do it.
So, it’s only natural that the FinTech industry is trying to crack the code and cash in on this massive opportunity.
Let’s explore the Millennial Savings Problem — what’s going on here, where did it come from, and what will be the next big FinTech solution.
The Millennial Savings Problem
Let me hit you with a couple of facts:
- This generation ranges from age 24 to 39 (2020)
- Millennials have an average net worth of less than $8,000
- 62% Of millennials live paycheck to paycheck
- 46% Of millennials had no savings in 2017
What’s going on here?
To start, more than one-third of Millennials choose non-traditional career paths. They certainly aren’t sticking with one company for 45 years, collecting their gold watch and retiring. This isn’t available to them, and they wouldn’t want it anyway.
Next, many Millennials work multiple jobs, contract work, and “side hustles”. Big salaries and 401(k)s are hard to come by. This shapes their financial perception and changes their savings habits.
However, this doesn’t mean Millennials don’t want to save money. They want to save for the here and now. Save enough for travel, events, and gadgets. Sometimes they just prioritize a rich life over a rich bank account.
We just made our biggest investment yet, into a percentage-based cashback savings app that is addressing this massive problem. Think Acorns app ($1B personal finance app) for Millennials. Click here to learn how you can invest right now.
Different Circumstances, Different Priorities
So, where did this come from? Why don’t they just follow in their parent’s footsteps?
The reality is, Millennials’ financial decisions have been shaped by the world around them. Many Millennials were eagerly joining the workforce right when the Great Recession hit. Low wages and difficulty finding work halted many of their careers.
The world that emerged from the recession saw the largest gap between the rich and middle class in the last 90 years.
Having grown up in such a tumultuous economy, they may always see finance through this lens.
No matter the reasons, Millennials have very different habits and perceptions than previous generations. They tend to distrust traditional financial institutions, instead, opting for digital solutions they find on social media.
And this isn’t a trend to be scoffed at, this is the new norm, this is the future. Luckily for us, this is an outstanding opportunity. Startups that help Millennials save are already seeing fabulous success.
Millennials are the largest group in the workforce. They are the largest generation in human history. We are on the cusp of a massive exchange of wealth and power that will leave Millennials on top and in control.
Entrepreneurs and investors are trying to crack the code. What are the next big tools that can serve this market?
Investing in the Now
To understand this opportunity, first, you need to get inside the Millennial mindset.
The “experience economy” is king. Things like concerts and travel — things that bring a sense of adventure and spice to their lives.
This is driven by social media. Here, “social currency” can be as valuable as real currency. In this world, showing off your wealth of objects and experiences can net you a hefty return.
Get this — 47% of Millennials say they would rather save for travel than for buying a house.
Studies show that up to 75% of them want the same cars, clothes, and gadgets as their peers, and are willing to go into debt to get them. They regularly save for and buy these things, working hard for today rather than tomorrow.
For better or worse, this mentality is defining their generation. As it stands, financial institutions aren’t ready to serve this new financial philosophy. Culture is changing much faster than the big banks.
This is why there is so much attention on FinTech right now. The digitally native Millennials can easily be reached through high-tech mediums.
Sure, the Baby Boomers have more financial power, but they have already been figured out. The financial world has been catering to their needs for decades. Millennials, on the other hand, are a puzzle that needs to be solved. And their future economic power far outweighs that of the Boomers.
For this reason, Millennial activity is a defining factor in the FinTech movement, just as it was for social media and the sharing economy. Millennial FinTech may just be the next big thing.
FinTech to the Rescue
Even though these FinTech solutions are in their infancy, Millennials have already taken to them.
Today, 45% of Millennials are more interested in investing in the stock market than they were just five years ago. This is due to a wide array of apps (think Robinhood) to work with and a spread of info from peers and influencers via social media.
An example of a FinTech startup that works with, not against, the Millennial mind is micro-investing app Acorns. This app “rounds up” to the dollar on every-day purchases, investing the “spare change” into vehicles of their choosing.
The problem: Millennials don’t invest enough, they’re intimidated by it.
The solution: Acorns, a fun, easy way to save while you spend.
Acorns is already smashing success, having raised $207 million of private capital and gained around 3.5 million users. Today they sit valued at nearly $1 billion.
There is another startup addressing a similar, much larger problem.
Startup With Cash-Back Savings App Taking the Next Step
The problem: Millennials don’t save enough. They save for entirely different reasons than other generations.
With this savings tool, users can define their own short-term savings goals. Let’s say you want to save for a trip to Italy. You decide how much they want to devote to this goal, and how long it will take.
Then, when you make every-day purchases, a percentage of your choosing is pulled from your account and saved.
When you reach your goal, you can book the experience right in the app. In the app’s marketplace, you can buy your plane ticket and hotel and earn a cash-back that goes right into your account to be used towards the next savings goal.
You can even get cash back on big-brand products on the marketplace.
It plays on the psychology of the experience economy and creates a user-cycle that rewards activity and spending.
Save, spend, earn, repeat.
We just made our biggest investment ever in this app. All Boardroom members have access to the deal, and for a limited time, anyone can get one-time deal access and invest alongside us.