How to get millennials saving in a world of instant gratification

Buying a new, expensive pair of shoes with money saved from a summer detox instead of investing in their pension is something many millennials would choose. After all, they get the benefit of wearing the shoes now rather than in the future and instant gratification is one of the common characteristics of this generation.

Millennials, like me, have grown up in the instant gratification economy and we have no idea what it’s like to live in a world where it’s not possible to get virtually anything we want delivered to our home with the click of a mouse.

A report from Fetch and YouGov last year called, The Instant Gratification Nation, found that more than half (52 per cent) of millennials said they were more impatient today than they were five years ago as a result of their reliance on technology, compared with 34 per cent of people aged 55 and over.

Arguably, this is the crux of the millennial savings deficit – they’re hooked on instant gratification, over long-term planning. This is not good news for pension saving, something this generation really needs to action if they want to have a reasonable income in retirement.

What could help millennials become more engaged with pensions?

This is a question I have thought about a great deal. One thing that is ever-present amongst millennials (along with mobile phones and tablets) is using a Fitbit, or similar, to help them focus on their health. And I wonder if this is something the pension world could learn from?

Is there a market for a similar pension product to be developed called the Ritbit (‘Rit’ standing for retirement) that could help people focus on saving for their pension?

If the technology had the capability to buzz before people made purchases, it could make them think twice before they spent money. Equally, it could send alerts to let people know they are behind with their savings progress – just like the Fitbit step count. This could help establish individual benchmarks to work towards and offer congratulations when savings are on track.

One of the benefits of this imaginary tool is that it would be real-time and make saving part of everyday life. It would always be active and no logins would be required. And while it may look just like a strap around the wrist, it really could help millennials change their savings behaviour for the better with its constant reminders.

While this may seem a little far-fetched, many of the ideas can be translated into actions that could help millennials become more interested in pensions and savings. Here are some tips for companies looking to improve pension engagement:

Millennials are reliant on technology to manage their lives, so companies should be making more use of email and texts. Constant nudges and reminders could be sent to people’s phones, though they need to be relevant, topical and fun.
Tailor communications. Remember to use language that is straightforward and engaging, and use communications millennials use such as email, text, podcasts, social media, YouTube etc.
People buy experiences and feelings, not products. The ins and outs of how pensions work, acronyms such as ‘PPP’, ‘LISA’, ‘GMP’, ‘SIPP’ and terms like ‘flexible drawdown’ and ‘entitled worker’ are all financial jargon that will make most millennials switch off and should be avoided.
Emotions have a big impact on future decisions, so it’s essential to tap into people’s emotional side. Help people picture what car they could buy or the holidays they may go on in retirement. Emotional triggers can focus the mind far better than reams of financial literature.
Use emotional marketing campaigns. For example, show how building a good pension pot means that when people retire they have more money to spoil their grandchildren, to ensure their children’s financial stability and to spend quality time with their families and friends. It might be hard for people to get their head around something that might not pay out for another 40+ years. But it will ultimately mean they can enjoy their time with those they love without worrying about their finances – a great call to action.
Studies show people often see their future self as a stranger. Companies could change this by running a fun campaign such as ‘your selfie @60’ – helping people get to know their future self. Once people have an idea of who they will become they are more likely to be able to visualise their hopes and dreams for the future and what savings they will need to achieve these.
Make pensions matter to people now and show them their current financial situation and how this will look in the future if things stay the same. Tracking their savings progress with an online tool they can access daily can really help people become more engaged in their financial situation.
Play on the ‘loss aversion theory’ ie the fear of losing out. People feel the impact of losses twice as much as they do gains, so show people what they will miss out on in retirement if they don’t have a decent pension income.

Utilising technology to counteract instant gratification

Technology has a huge part to play in changing pension behaviour for the better. And while it’s responsible, to a degree, for encouraging instant gratification, it can also be used to counteract this and make people stop and think.

Just like the Fitbit is encouraging people to become heathier, technology can help keep pensions and savings at the forefront of people’s minds. Tailored communications delivered in a way that appeals to millennials will help them understand why they need to save now and ensure their financial future is healthier.

The author is Johanna Nelson, associate director – communications, Punter Southall Aspire.

This article was provided by Punter Southall Aspire.