Richard Jenkings, demographics expert at Experian
It’s tempting to think children will pick up everything they need to know about financial matters, just as and when they need to.
However, demographics are changing and tomorrow’s consumers will be different from those of today. Any lessons they pick up now, as children, may be not be relevant when it’s time to cash them in as financially independent adults with important decisions to make.
Earlier this month, My Money Week ran with the aim of improving schoolchildren’s financial literacy. Yet it also offers a reminder for brands to consider how they market to changing demographics, and what messages will hit at the right time for the right segment – when they are most receptive.
The only constant in life is change – and change is happening faster than ever. It’s no wonder that young people face an often-bewildering array of financial lifestyle choices, products, and important decisions when the backdrop is more changeable than ever.
Experian’s model is based on a wide range of data, including demographics, lifestyle, social, economic, behavioral, product consumption, service and channel preferences for more than 49 million UK adults, as well as a 220,000-strong YouGov panel. It offers a view on the changing demographics of consumers, covering lifestyle and attitudes to finance.
Don’t assume the future is going to be the same
As the cost of living rises and consumers struggle to get on the property ladder, older demographics that exist today will disappear as recognisable forces – and new ones have already emerged. For one, over the past decade over one million people who would previously have bought houses, have been forced to rent instead. The often insurmountable challenge of securing a property has now made Britain a country of renters who prefer to put their discretionary spending on cars or holidays rather than expensive houses.
The Millennial generation and the Centennial generation just coming into the workforce are different in many ways to proceeding generation. They are not email responsive: to them it is ‘old hat’. They do their thing collectively on social media. For the older, professional, population, using Facebook is cool, but for Millennials, it’s so last year – or last decade!
They care about social issues. They have shown a rise in political participation brought into clear focus by the recent election and are not afraid to share their emotions and get involved, as we have seen recently in reactions and support to events in Manchester and London. To communicate, a brand must be genuine and have be socially-conscious bulletproof.
Although they will have a different financial life, many of the same principles of financially sound behaviour hold generally true: Don’t spend beyond what you have or can afford to borrow… You will always have to trade off ‘jam today’ against ‘jam tomorrow’.
This group of young adults in previous times would have been first-time buyers much earlier. Now their aspiration are as renters who hope to buy one day – if it ever becomes possible. They can also be termed as the ‘jilted generation’, because they are less well off than preceding generations who benefitted from factors such final salary pensions and high house price inflation, at the right time for them.
Communicating with this new cohort of consumers requires a careful understanding of what has changed, and how economic and demographic factors are interacting to create new kinds of consumers facing new kinds of challenges – and needing new kinds of financial solutions and communications to cope with them.
New styles of spending now and later in life
Despite the hardships this younger generation face from high house prices, low wage growth, repayment of higher student loans and the cost of renting, they care strongly about their careers and tend to be very mobile and digitally literate. Given the economic challenges, enjoying the here and now seems a reasonable response to where they find themselves.
They should know of course that lots of long haul trips now less money for savings or pensions later. As always it’s about a sensible balance between living well now and potentially living comfortably later. It’s easy for an older person to give advice but much harder for someone living in interesting times to actually take it.
Communicating with this generation is better over email than with their elders, but any interaction with them is more fluid using their mobile device via apps – and they’re almost twice as likely to respond to social media than any other demographic. Unlike earlier generations, print media advertising is not a useful channel, but cinema or billboards still cut through.
As time goes on and the group of aging homeowners shrinks it may have a further knock-on effect on younger generations. When they become pensioners they will not be able to release the equity in their homes, which in times past allowed a wave of money to flow down generations. In time, there will be less money to pass onto following generations.
Part of My Money Week for children is to begin to get a better understanding of the financial instruments and best practices to help them on their life journey. For brands this means understanding customers closely both now, and how they interact with their finances – and those of other generations.
One of the challenges in marketing is properly taking account of the gradual but seismic changes and adapting the communications, products and advice to a widening pool of experiences and audiences that will have remarkably different life experiences.
But in the end some things don’t change and Mr Micawber’s famous, and oft-quoted recipe for happiness hasn’t changed since Dickens wrote it down in his 1850 David Copperfield: “Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Far be it for me to disagree.