by Danielle Flynn, Castlight Marketing Manager
More than one in five 25-35 year olds spend more than 60% of their income on the very day it enters their account and 3% of these millennials even find themselves in the red by the end of payday, according to a survey by KPMG and reported in insider.co.uk. KPMG’s survey went on to show that the 42% listed unsecured loans and credit card payments as a significant payday outgoing.
Another article, by Shawn M Carter published on the US site CNBC, examined social media’s impact on American spending habits and found that 90% of millennial respondents say social media creates a tendency to compare their own wealth or lifestyle with those of their peers. And that 57% of the millennials surveyed reported feeling “inadequate” about their own life and then went on to part with money they hadn’t planned to spend.
With big brands investing increasingly bigger chunks of their marketing budget on “influencers”, across various social media platforms, millennials are being bombarded not only with images of their peers’ holidays, handbags and harissa chicken but also a stream of images of social media influencers living the dream.
Top influencer Huda Kattan is a make-up artist and beauty blogger with 24.3 million followers on Instagram and 2.2 million subscribers on YouTube. And when Kim Kardashian wore Kattan’s branded false eyelashes, so did thousands of her followers. Kattan’s currency soared and her spot at the top of the influencers’ charts confirmed.
As a millennial, it’s clear that we are exposed in subtle ways to the influencers’ machine and to a relentless pressure to spend. There’s also a sense that spending beyond one’s means has perhaps become normalised, in a way which it wasn’t in previous generations.
At Castlight Financial we are known for our Affordability Passport which uses open banking to look at a customer’s bank transactions, categorise them into 155 categories of spending and 29 categories of income and provide a definitive analysis of exactly how much a person can afford to borrow and repay. The Affordability Passport is primarily used for people looking to secure a mortgage or a loan and can allow brokers and lenders to provide a report and an answer in under 10 minutes. However, the powerful categorisation technology that powers the Affordability Passport, can also be used to help people improve their money management skills – or Financial IQ.
Our data scientists are currently fine-tuning our software so that millennials, and other generations too, will soon be able to run their transactions through our software, see exactly where they are spending their money and whether they demonstrate a high or low Financial IQ. And if it’s a low Financial IQ, what they can do to improve it.
Watch this space as I believe that, before we know it, social media influencers are going to have a lot less influence. As we all take on board the tools that will help us increase our Financial IQ, we will be more aware of what we are spending and why. We will be able to take back control of our bank accounts and stay safely in the black way beyond payday.
Just because Kim Kardashian wore Huda Kattan’s lashes that doesn’t mean we all have to!