Gen XY Financial Maturity: Balancing Act

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1 Gen XY Financial Maturity: Balancing Act A Multi-Sponsor Opportunity December 2013 Mathew Greenwald & Associates

2 Introduction Generations X and Y may be the most financially-strained generation in recent history. They have been called the Recession Generation, Generation Debt, and countless other names appropriate for two cohorts that face tremendous financial pressures. These young consumers struggle with conflicting financial priorities and competition for their funds across multiple goals, including paying for their education, paying down related debt, being able to afford housing, managing a higher cost of living, and the need to save for short and long-term goals, from life insurance through retirement & long-term care. Young consumers know they should be saving for emergencies, for their child s education, for retirement. Last year, Greenwald s Gen XY multi-sponsor study found that seven in ten members of these younger cohorts felt it was harder for them to save than it was for prior generations. Our survey found that paying down debt was the third most important objective of Gen Xers and Yers, when thinking about their financial future, trailing retirement accumulation and decumulation goals. Importantly, more than four out of five indicate that an insurance or investment product that could help them pay down debt is appealing. A recent analysis by the Pew Research Center found that, among households headed by someone younger than 35, a record 40% had student-loan outstanding debt. The average outstanding balance in 2010 was $26,682, but 10% owed more than $61,894. Debt is stunting the financial growth and maturity of Gen Xers and Yers. Helping these consumers overcome their debt issues and transition into saving for the long-term may be the most effective way for insurers, benefits providers, and retirement solutions providers to establish trust and gain traction with this large group of consumers. Financial services companies are well positioned to help young consumers with the difficult balancing act they face every day, and which may have lasting impact on their financial security and ability to save & invest for life.. 2

3 Focus on Debt Young consumers are struggling to balance the need to pay down their debts with the need to save for short and longer term financial goals, especially retirement. Our research, as well as countless other studies, suggests this is the primary obstacle to engaging Gen X and Gen Y in thinking about their insurance and saving needs. The inaugural Gen XY Financial Maturity study will build upon four+ years of research examining how Generation X and Generation Y consumers make financial decisions and their attitudes about their financial futures. This year s study will focus heavily on debt, as well as other Gen XY financial priorities and the obstacles to success. More so than simply measuring the extent of the problem, this study aims to test possible solutions to the debt dilemma. Test new concepts for how financial services firms can help young consumers in a way that encourages future use of their products & services Gauge interest in receiving individual and workplace help from a variety of financial institutions Uncover what vehicles financial management sites, news media, social media, one-on-ones, group meetings, clubs & community groups are most effective for delivering financial education and selling financial protection products Understand the extent to which debt, especially student loan debt, is impacting other financial decisions Test receptivity to direct purchasing of financial products and preferred approaches 3

4 Why Sponsor? Sponsors will gain a better understanding of young consumers receptivity to debt reduction educational programs, products & services, and the extent to which these programs, products & services will build lasting loyalty. The research will: Inform Gen XY marketing plans by identifying messages that resonate with younger consumers Guide product and service development targeted to this age group Reveal new ways to encourage young employees to participate in voluntary workplace benefit plans and retirement savings plans Identify the best times and places to reach these young consumers with education, advertising and product offerings Refine new concepts for products and services that can help young consumers balance the need to pay off their debts while also preparing for their financial future WHO SHOULD SPONSOR Retirement plan providers Employee benefits providers Life insurers Investment companies Providers of financial education & advice Payroll service providers Banks & Credit unions 529 providers Credit card companies Sponsors will be permitted to use the study s findings to educate employers & advisors about the need for targeted education and communication, generate social media discussion, and inform their own product development & research efforts. All external use of the study must be discussed with Greenwald & Associates and properly cited as Greenwald & Associates Gen XY Financial Maturity Study. 4

5 What we can cover The balancing act & impact of debt You set the tone. All sponsors are encouraged to provide ideas and concepts for testing, as well as other attitudes & behaviors they would like to explore. What are Gen XY s current financial behaviors & attitudes? Short-term, mid-term and long-term financial goals and success/ timeframes for achieving them Debt management amounts, types, defaults, forbearance, current payment methods Obstacles to saving & investing, in addition to debt Trust in financial institutions to help them now & in the future Comfort managing finances/use of external help Reaction to help education & advice at work versus on their own Product ownership and perceived need/value of specific financial products & services To what extent is debt, especially student loan debt, impacting: Emergency savings Job choice & job security Family choices, like getting married or having a child Perceived value of employee benefits What characteristics are sought in financial services companies & advisors Perceptions of financial vulnerability & the need for income protection Saving for a home Saving for a child s education Ability and/or desire to save & invest outside of the workplace Retirement savings 5

6 What we can cover Test service & communications concepts Commitment devices Currently regular payments are made to lenders. Once those debts are paid, how can we encourage regular payments be redirected toward retirement savings or voluntary workplace products? Online tools & calculators Are there online tools that can be developed to help young consumers determine how to allocate their limited funds across multiple goals or know if they are on track when benchmarked against peers? Can companies develop a choice optimizer that helps young consumers determine how much they should be saving versus paying off their debt? Reframing life & disability as debt protection products How do young consumers react to messaging that positions life and disability products as debt protection for their loved ones? Is this messaging more relevant to them? Expansion of automatic programs To what extent are Gen Xers and Yers using direct deposit & automatic bill-pay? How can this be used to ensure ease-of-use and contributions to savings & investment accounts? Can automatic enrollment and escalation programs be expanded beyond retirement plans to encourage greater use of life & disability programs? EAP & Credit counseling programs How can EAP providers, banks, and credit card companies be leveraged to provide education in a way that encourages future use of more sophisticated financial products? Does offering a credit or financial counseling program build lasting loyalty? Payroll deduction What if student loan payments could be deducted from paychecks, regardless of tax treatment? Would acclimating young employees to payroll deduction improve their willingness to have money deducted for other purposes? Can employers reward young employees for making this fiscally smart choice through credit card-like rewards programs or contributions to retirement savings? 6

7 How it works Greenwald & Associates will conduct an online survey of 2,000 consumers age 21 to 48, representing both Generation X (born ) and Generation Y (born , by our definition). Respondents will be screened to ensure they have at least a high school education and a household income of at least $25,000 if single and $50,000 if married. From this group, we expect 500 to 1,000 respondents will have outstanding student loan debts or have recently paid-off significant loans. With sponsor input, Greenwald & Associates will develop a 20-minute questionnaire for this project and will manage all fielding, analysis and reporting. Sponsors will provide input on the direction of the questionnaire and concepts to be tested in kick-off calls with the Greenwald team. They may also provide feedback on questionnaire drafts. Greenwald s research team will synthesize sponsor feedback and will make all final decisions about the questionnaire. For cost and planning purposes, we assume the questionnaire will include no more than three open-ended questions, the results of which will be coded. Deliverables will include: An annotated questionnaire showing overall results among the total sample A PowerPoint report of the most interesting & actionable survey findings, highlighting generational differences and other meaningful sub-group differences One all-sponsor data tabulation book that covers basic demographics of survey respondents One custom data tabulation book, allowing sponsors to specify the age and income breaks they prefer, and include crosstabs on items of interest Participation in a webinar to present the study s findings 7

8 Costs & options The base sponsorship cost for this year s study is $12,000. Greenwald & Associates takes pride in its ability to be flexible to client needs, and we will be happy to work with you if you require any oversampling, custom reports or inperson presentations. Options Additional data tabulation book $600 Oversample of 500 (example, depends on specs & reporting needs) $6,000 - $14,000 Custom white paper (5-8 pages) $4,000 Custom webinar presentation $800 Custom in-person presentation (plus travel billed at cost) $1,000 To discuss sponsorship of this year s study, contact Lisa Schneider at (202) or lisaschneider@greenwaldresearch.com. 8

9 About Greenwald&Associates Full-service research experts Exclusive focus on retirement, investments, life insurance, employee benefits, and healthcare Mid-sized firm (25 full-time staff), flexible to client needs Dedicated project teams, based on subject matter expertise and client needs In-house telephone interviewing facility at our headquarters (50 CATI stations) Financial Services Employee Benefits Consistency and experience for 28 years Healthcare 9