Millennials are getting worse with how they manage money, and Navy Federal Credit Union has the data to prove it.

According to a new study commissioned by Navy FCU in partnership with Forrester Research, only about one-third (37 percent) of the 1,600 millennials surveyed said they are focused on their finances, a 15 percentage-point drop from just two years ago. Moreover, while 90 percent say savings is a “top priority,” fully 83 percent of survey respondents don’t have an emergency fund (though that figure drops to 73 percent for millennials in the military). And when it comes to retirement, 72 percent (65 percent for military members) aren’t saving for retirement.

When it comes to budgeting, only about one-sixth (18 percent) of millennials say they have a household budget they review annually, and only one-third (36 percent) have checked their credit score within the last year. Barely a quarter of respondents (26 percent) feel like they know enough about managing money to meet their monthly financial goals.

The oldest millennials are now about 35 years old, meaning many are firmly established in adulthood and all the attendant responsibilities, such as paying mortgages, saving for children’s education and more. Still, Navy FCU indicated that most millennials are “unsatisfied” with their financial situation, and consequently are delaying important duties like buying a home and saving for retirement.

But the overall theme of the report indicates a dramatic contrast: millennials remain optimistic about both their financial health and the state of the overall economy, but their personal financial habits do not inspire much confidence.

And that could be a huge opportunity for credit unions.

“Our survey shows millennials know saving is important, they just need the tools and guidance to reach their financial aspirations. That’s where we come in,” said Marcia Sanford, vice president of member research, intelligence and development at Navy FCU. “Financial institutions can and should do more to close the gap between what millennials think they’re prepared to handle and the reality of their financial situation.”

‘Unique needs’
In an interview with Credit Union Journal, Katie Miller, senior vice president of membership at the $82 billion-asset institution, said credit unions can use this data as an opportunity, but first they need to understand the “unique needs” of their millennial members.

“Our survey reveals it’s important to make managing finances easy and accessible, and offer the right products and services to help with savings and budgeting challenges,” she said. “Credit unions are a valuable and trusted resource for members, and getting guidance is easier than millennials might think.”

A little more than a year ago, she noted, Navy FCU launched “MakingCents,” an online, interactive educational tool that provides guidance on everything from buying a house or a car, to getting out of debt and paying for college. That product is intended to augment the in-person financial guidance the credit union can provide to members at branches and on military bases where it operates.

Miller also addressed why so many millennials appear to have lost interest in their financial health and futures.

Katie Miller, Navy FCU
Katie Miller, senior vice president of membership at Navy FCU

“The data shows millennials do know how important savings is, which is a great first step,” she said. “Many millennials are still in the ‘borrowing’ phase of their lives. Our findings show both general population and military millennials have substantial debt, and while saving is their top priority, paying down debt is their second most important financial goal. This is where taking advantage of budgeting tools or debt consolidation resources a financial institution can offer could help millennials pay down debt and get on track to save more.”

Establishing good financial habits now will pay off in the future as millennials get older and have more discretionary income to put toward savings, she elaborated.

As has been widely reported, one of the biggest hurdles for many millennials is student loan debt, which now exceeds $1 trillion nationally.

“A great way for them to manage those monthly [student loan] payments can be through student loan consolidation,” Miller suggested. “We recently started offering student loan consolidation products so that members can consolidate both federal and private student loans into a single loan.”

Military matters
Navy FCU is unique in that it the world’s largest credit union, and – as its name suggests – a large portion of its members are serving or have previously served in the armed forces. And that experience impacted the survey results.

Miller said the CU’s data shows military millennials are “slightly more conscientious” about money matters than their general population peers. “As a result, they are in slightly better financial shape than general population millennials,” she said. “Data shows military and veteran millennials have the highest incomes and feel the most confident in their financial situation. They’re also most likely to own a home and least likely to live with their parents.”

Optimism could play a large role here too, Miller advised. “Military millennials – both active-duty and veterans – are at least 25 percent more optimistic than general population millennials when it comes to the economy and their ability to save more,” she offered.

And the future of credit unions lies with this demographic. CUs have undergone dramatic membership growth over the last six years, much of it coming from millennials intrigued by the cooperative business model and the credit union philosophy of “people helping people.” In the last few years, Miller added, millennials have consistently accounted for about 38 percent of Navy’s membership. Navy’s average member age, said Miller, is just 37 years old, compared to the national average of age 47, according to 2015 data from the World Council of Credit Unions.

Indeed, according to the Pew Research Center, citing data from the U.S. Census Bureau, millennials overtook baby boomers last year as the nation’s largest living generation, with 75.4 million millennials compared to 74.9 million boomers. The millennial population is projected to peak in 2036 at 81.1 million.

Long-term viability
The study’s findings – and, moreover, the behaviors it references – could have a significant impact on the credit union movement’s long-term viability, some sources said.

According to Geoff Bacino, a former NCUA board member and now a partner at Washington-based consultancy Bacino & Associates, as the membership of the credit union movement “grays,” they move from being net-borrowers to net-savers.

Geoff Bacino, Bacino & Associates
Geoff Bacino, partner, Bacino & Associates

“Obviously, this has an effect on the credit union's bottom line,” Bacino said. “Millennials… are the next wave of potential credit union members and they are vitally important to the continued growth of our industry. Many credit unions have programs designed for these two groups – one of the keys is reaching and retaining them is the use of technology.”

Bacino added that millennials – along with younger cohorts coming up behind them – are “very comfortable” with new platforms and often will not even set foot in a branch office.

Dennis Dollar, a former NCUA chairman and now a credit union consultant in Alabama, observed that credit unions, like all businesses, have to reach the millennials if they are to have long-term viability.

“The cause orientation of the millennials and Gen Y open the door for a not-for-profit, member-owned financial cooperative as a viable alternative to the larger for-profit banks if we can stay relevant from a technology perspective," he said.

Bacino and Dollar are by no means the first to say that – as CU Journal has reported, some analysts now say if credit unions don’t have a digital payments strategy that interfaces in the manner tech-savvy young consumers are accustomed to, growing the credit union could be that much harder.