Have you ever considered how millennials manage their money? It’s not a presumed area of expertise but their love for technology and demand for an optimal customer experience makes millennials trendsetters for the “cool” way to do virtually anything, including money management.
Even their not-so-desirable financial management habits offer suggestions for the types of habits small and medium-sized enterprises (SMEs) should develop for their own financial health.
Statista, a global statistics database, recently compiled a dossier of insights into the financial management habits and behaviour of millennials in the UK.
Based on that research, here are the money management dos and don’ts you should take away from them and use for your business.
1. They don’t go to the bank
Much like other traditional processes, millennials prefer managing their finances digitally versus physically going to a bank. Results show 81% prefer online or app-based banking, compared with 9% who prefer face-to-face banking.
Suggestion: Follow the trend
Because we know millennials prioritise convenience and experience, it’s safe to say they can point you in the right direction for the financial management tools that offer the best in both.
Digital money management tools offer the convenience of mobility, allowing you to tackle financial admin tasks anytime and anywhere, from any internet-connected device.
Integrated software systems – such as accounting software that combines payments software and bank feeds – make money management easier by eliminating manual number-crunching and combining all views of money in, out and around your business.
2. Their biggest hurdle is keeping an eye on cash flow
When asked about their financial pitfalls, 46% of the millennials said they had never checked their credit report. Meanwhile, 25% said they had run out of money before pay day, 21% had gone into an unplanned overdraft, and 13% had their card declined without realising they were out of money.
Suggestion: Know your numbers
Cash flow is crucial especially for businesses that typically don’t have resources to spare. Keeping track of what’s coming in and what’s due can be tedious. While you’re researching digital options such as integrated software, consider options that offer real-time updates and reporting from all your connected accounts.
The better your insight into your money streams, the better you’ll be able to predict where your cash will be tied up or flowing freely. This will help you make better financial decisions and get ahead of problems while they are manageable.
3. Most of their personal debt comes from credit cards
The top three sources of personal debt for millennials are credit cards (42%), overdraft fees (27%) and bank loans (20%).
Suggestion: Keep the lines of communication open with your suppliers
The best view of your money channels is one that shows you where there may be a money shortage in advance. If you know you’re going to be cash-strapped, rather than turning to credit cards and bank loans or dipping into your overdraft – or being late with your payment – try talking to your suppliers about your expectations and negotiate alternative payment terms.
Your suppliers will appreciate the gesture and will likely be more willing to work with you. That good rapport will make them more comfortable extending credit to you once you’re back in the clear with them.
4. They don’t carry much outstanding personal debt
According to the stats, 57% of millennials say they don’t have any personal debt. Meanwhile, 7% say they have less than £1,000 of debt, 10% have between £1,001-£2,500 of debt, and 6% have more than £5,000 of debt.
Suggestion: Follow the trend
It’s smart to keep debt manageable so you have control of your firm’s funds. If you see you’re about to run into a financial shortfall beyond paying your suppliers late, you may want to consider alternative funding to fill in any gaps.
It’s important to closely manage this money stream as well so you’re not digging a bigger hole for your business. Many integrated accounting solutions also offer business lending services and include a detailed view of loan account activity alongside your other money streams, so you’re always up-to-date.
5. They’re not the best at investing disposable income
Millennials who have extra cash don’t necessarily make the best decisions when spending it. The results show 54% prefer to go out for a meal, 51% spend it on socialising, and 35% splash out on clothes.
Meanwhile, 34% are saving for a rainy day, 32% are saving for a one-off purchase (such as a holiday, car or TV), and 19% are saving for family related costs (such as things for their children or to pay for a wedding).
Suggestion: Invest for business growth
Where most millennials prioritise a night out with their BFFs, you should prioritise investing in growth management, such as hiring new staff, buying new equipment and purchasing more inventory. These types of investments yield long-and-short-term revenue opportunities.
Before you spend any extra cash, consider whether that purchase will add to your profit margin. If not, you may want to think twice.
Got any good money management tips other businesses can learn from millennials? Share them in the comments below.