Financial literacy is key to helping millennials get out of debt, experts say
Millennials owe more than baby boomers do, according to TransUnion's latest report
Jessica Moorhouse said it wasn't until after university she started to get a handle on her own personal finances. Like many other millennials, she continued to do her banking with the same bank her parents used.
Moorhouse, who is now a millennial money expert and financial counsellor, began to wonder if she was doing this whole banking thing right.
That's when she began to Google questions she didn't know the answers to, and eventually, she stumbled upon personal finance blogs.
"That was the thing that kind of changed everything for me because then I realized, oh I'm not an idiot for not knowing these answers," Moorhouse said.
"This is actually something that everyone has asked themselves and that's what ... opened this world of personal finance to me."
She said this inspired her to make a career out of it and help other millennials get a handle on their personal finances.
Moorhouse said banks should focus more on financial literacy and transparency in order to help millennials get out of debt.
According to a recent Statistics Canada study comparing millennials to the generation that came before them, millennials made more money than gen-Xers did at the same age, but they also owe more too.
A report from credit reporting agency TransUnion tells a similar tale — millennials are now the generation carrying the second highest amount of total debt, behind gen-X, but ahead of their boomer parents.
That's not a surprise to Moorhouse, whose clientele are primarily millennials.
"A lot of my clients, they come to me, they discuss where they're banking, and they have no idea that they're even paying monthly fees," Moorhouse said.
"How can you not know that? How did someone not explain that properly to you?"
At the end of the day, Moorhouse said a big part of the problem is that banks are fundamentally selling debt, which many young people don't fully understand.
"They get a loan or get a credit card or get into some sort of debt product and they don't really know all the information and I feel like it's kind of up to the bank to really take responsibility for that."
Do your own research outside of the bank
Moorhouse said banks have a responsibility to educate their clients and be more transparent, but she thinks consumers should be proactive and do their own research.
"You can't just go to one bank and expect to get all the information you need from one person that's at that bank," she said.
"You need to do your own due diligence because it is your money."
We don't want to just be sold to, we want you to give us actual valuable information.- Jessica Moorhouse, millennial money expert and financial counsellor
Slowly but surely, Moorhouse said, banks are moving in the right direction.
There are many robo-advisors, discount brokerages and online banks out there that are appealing to younger generations.
Moorhouse said a lot of these companies that have a good online presence are putting a focus on making things more user-friendly and providing customers with financial literacy tools which attract not only millennials but the generation that follows — generation Z — who are even more tech-savvy.
"We don't want to just be sold to, we want you to give us actual valuable information," Moorhouse said.
For example, TD Direct Investing offers online services for those new to online investing as well as those who are more experienced.
TD Direct Investing also has an online learning centre which Moorhouse said provides customers with video lessons to broaden their investing knowledge. They also offer webinars and online master classes.
RBC also released a new feature to their mobile banking app earlier this month called the RBC Mobile Student Edition aimed at teaching generation Z about money management and financial literacy.
According to RBC's research, 38 per cent of post-secondary students and 33 per cent of high school students feel like they have their finances under control.
RBC created this feature within its mobile app to respond to the significant need for financial literacy resources available to young adults.
Rami Thabet, RBC's vice-president of digital product, worked with 400 young adults to come up with their app.
"What we heard loud and clear was that their financial needs were different," Thabet said.
In addition to having a simple design and personalization features, the Student Edition focuses on accessibility like explaining key banking terminology and financial terms in a way that younger users can understand, Thabet explained.
The feature also puts savings at the forefront and allows users to set up reoccurring savings right from the home screen of the app.
Different versions of financial success
Andrew Au, millennial expert and co-founder of a marketing consultancy firm called Intercept Group, said one of the issues banks have with supporting younger generations and their debt is keeping up with their changing idea of financial success.
Au said success for baby boomers meant financial stability which is not the case for millennials or generation Z.
"Success, now, is about pleasure. It's about enjoying the ride. It's not about getting to any one destination," Au said.
"I think it comes down to how the definition of success is evolving and banks need to keep up with that."
Au said he personally likes Wealthsimple because it's an example of an online investment company that understands millennials and their idea of financial success.
Wealthsimple is a digital investment manager that combines technology and human interaction to provide customers with investment products and advice.
80 per cent of the firm's clients are under the age of 45.
"This demographic really understands what technology can do," Michael Allen, portfolio manager at Wealthsimple, said.
"They expect to manage their money from their phones … it needs to be really simple and accessible."
Wealthsimple offers clients various products like Wealthsimple Invest, Wealthsimple Save, and Wealthsimple Trade. The first one offers low-fee funds, the second functions like a high interest savings account, and the last one allows users to trade individual stocks.
The company also launched their Investing Master Class which teaches consumers the basics of investing and personal finance through a series of short video episodes.
"It all boils back down to taking the jargon out of the industry," Allen said. "So making it fun, making it exciting to learn about personal finance is really important to us."
Allen said Wealthsimple recognizes there is a stigma from previous generations around being open about personal finances and their goal is to try to break down those walls.
"The more conversations we can have about money, the better people will be at making future financial decisions."
Pays off in the long run
For Moorhouse, talking about finances openly with other people helped her along her own personal finance journey.
Getting to hear personal experiences from others about their finances through, for example, a blog or forum is different compared to getting advice from someone at the bank, Moorhouse said.
She said it is going to take the bigger banks a little longer to catch up to these smaller credit unions or online banks but the key is to focus on transparency and educating their clients.
"They will be better off for it because their clients will be more inclined to stay with them if they feel like they're getting that extra help and that value," Moorhouse said.