After hitting 55 years old, Mr. and Mrs. CU Member are thinking about that retirement around the corner. They have recently paid off their mortgage and celebrated with a mortgage burning party. They have also paid off all of the other modest debts they ran up during their productive years. Their kids are out of the house and on their own. Mr. Member has a generous pension to start drawing on in a few years. The pension and Social Security will allow them to live out their golden years comfortably.
Well, wake up, Mr. and Mrs. CU Member. It’s not the ’70s anymore. That fantasy life of the older crowd is a vague dream of the past. The pension, paid-off home, no debt and children out of the house is a world that did exist for a lot of people in the decades leading up to the ’80s, but that is not reality for most in the 2010s.
Yet that fantasy existence for the older crowd has hung around far too long in the thinking credit union gurus and demographic experts. Since joining the credit union industry in 1998, I have heard from every corner of the credit union universe about the need for credit unions to get younger. According to experts, the average age of credit union members is much above that of banks. The urging to get younger seems to make a lot of sense on the surface. Younger members, in demographic theory, are in their borrowing prime and income growing phase of life. They are buying or have bought their first homes, trade cars often and travel. That’s the fantasy life of the younger crowd that still drives demographic thinking.
The real world for the younger crowd is much different. The younger crowd is continuing to struggle to find jobs in a tepid economy. Many have had to return home after graduating from college. Many of those who did find jobs have found jobs in fields not related to their majors unless they majored in barista technology. The one area they have met expectations is in borrowing. Unfortunately, the debt they accumulated was from student loans, which is now a $1 trillion albatross around the necks of graduates.
Now back to Mr. and Mrs. Member of the 2010s. Private pensions went the way of the doo-doo bird and were replaced by 401ks in the 1990s. Those 401ks were then rocked by two 50% stock market corrections. Mr. and Mrs. Member got caught up in the housing ATM mania and took one or more cash-out refis, extending the timing of that mortgage burning party until they are in their 90s. Retirement at 55 was once the reality for many. Not anymore.
Despite the hits, the older crowd is also still in control of the money. A few months ago in an Esquire magazine article titled, “The War Against Youth” was published. The boomers really took it on the chin in this one. The children of the Greatest Generation came off as the Greediest Generation. (Being a boomer, I think I resent that.) But that’s not the point I took away from this article. There were a number of statistics regarding incomes, debt and life plans showing how difficult things are now for the children of boomers than for the boomers at the same ages. Let me give you the one statistic that jumped out at me. The average net worth of the 65 and over crowd in 1984 was $120,000, while the 35 and younger group worth was $11,500. At the end of 2009, the net worth of the 65-plus group was $170,500, while the under 35 set’s average net worth was $3,600.
I’m not suggesting credit unions should abandon the youth movement, but the numbers tell us that perhaps the prime market now is not the youth market but the market credit unions already have. Credit unions tend to equate technology with youth. Hate to tell you this, but seniors are catching on to this whole technology thing. Technological advances are important to all members. But what other strategies are you employing and what target market are you focused on? Ask any branding or marketing specialist what is the best way to build a brand and they will tell you word of mouth. Your best ambassadors for your brand just might be the members you already have. They might not tweet your praises. but they will tell their friends and family.
It’s clear that some perceptions about the outcomes of demographics are no longer valid. The younger generation is facing headwinds that are changing behaviors and expectations. But the older generation has changed, too. Sixty-five might be the new forty-five–or at least fifty-five. We’re living longer, working longer and borrowing for houses and cars later in life than ever before. Maybe credit unions need to seriously review their product and service offerings and strategic plans. Are you over-planning for youth? Most credit unions seem to think they know what younger members want, but how much time do you spend thinking what your older members would value most?
Dwight Johnston is chief economist at the California and Nevada Credit Union Leagues.
Contact 909-215-3657 or [email protected]
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