At RFi Group we have a set of internal saver segments, created based on savings behaviours and attitudes, which we use to analyse and view the savings market. When we profile these segments by age it becomes apparent that there are two segments where Millennials over-index; Goal Savers – savers who are saving steadily towards a specific goal and who will not withdraw money from savings until that goal is reached - and Rate Chasers - savers who use multiple accounts or who move savings around to take advantage of rate changes or to access the best rate. The higher than average proportion of Millennials in both these segments largely reflects the fact that Millennials are more likely than any other age segment to be saving towards a specific goal, and often a large goal such as a house deposit. Millennials are also more likely to be engaged with their savings, as reflected by the higher than average proportion of Millennials who are Rate Chasers, with Millennials significantly more likely than older Australians to know the interest rate applicable to their account and to deposit into their account regularly.
With Millennials demonstrating that they are engaged with their savings as well as saving towards a specific goal, there is a question about whether traditional financial service providers are doing enough to help Millennials meet these goals. Especially when the savings goal is a house deposit, are savers getting the support they need from their savings account providers to achieve such a goal? The rise of 3rd party budgeting and personal financial management tools suggests that there may be a gap in the market.
According to RFi Group data, Millennials are significantly more likely than average to use a 3rd party budgeting or personal financial management tool, with Acorns and Pocketbook among those most commonly used. Millennials are also significantly more likely than average to consider the concept of a personal financial management tool appealing, with 28% of Millennials rating the appeal of such a tool highly appealing (8+/10), compared to 19% of Generation X and 11% of Baby Boomers.
"According to RFi Group data, Millennials are significantly more likely than average to use a 3rd party budgeting or personal financial management tool, with Acorns and Pocketbook among those most commonly used."
Perhaps unsurprisingly, given the higher propensity of Millennials to be saving towards a specific goal, the ability to set and track progress towards a savings goal is ranked the third most popular feature of a personal financial management goal for Millennials. The feature considered most valuable would be the ability to create budgets for different categories, followed by access to a tool that identifies areas where they could cut back to save more. All of this points to Millennials being open to the idea of receiving help and guidance to meet their goals.
Despite the increasing number of 3rd party provided apps and tools designed to help consumers budget and save, the vast majority of Australians would most prefer a personal financial management tool to be offered by their main financial institution. Even among Millennials, who are the most likely to prefer to use a 3rd party provider (9% compared to 5% for Generation X and 3% for Baby Boomers) and who are also the most likely to be open to using FinTech and other challenger brands more generally, two in five indicate that they would most prefer this tool to be offered by their main financial institution.
For now, at least, it is traditional players who have the greatest opportunity to bring these sorts of tools to customers. Furthermore, with Millennials less likely than average to be satisfied with their primary savings account provider and more likely to switch, perhaps the offer of tools to help Millennials save and reach their goals could differentiate providers in the current low rate environment and even facilitate higher retention and cross-sell.