You might think of people hiding money under mattresses to be a relic of the Great Depression, but it seems the distrust of banks is alive and well 85 years later.
According to Facebook, about 92% of people 18-34 do not trust banking establishments. However, close to the same number of people have bank accounts. What this looks like is that those in the Millennial generation do not like banks whatsoever, but see them as a necessary evil.
It’s really hard to blame them if you look at the facts: younger kids are in more debt than ever before now and they have far less to show for it. Taking a look at some of the numbers for student loan debt is scary (it warrants its own article tomorrow) and it makes you wonder how far we have to go until the student loan bubble pops.
Even other than student loans, 18-34 year-olds basically got to experience a period of relative growth after the dot-com bust and then saw exactly what happened when things go awry during the 2008 recession, real estate prices bottomed out but rental prices always stayed fairly high.
Some of these Millennial-aged people are turning more to their own brokerage accounts in order to keep better track of their money and invest it as they see fit. They aren’t day trading, just parking the money in something akin to an index fund and keeping their money away from investment banks (which are the larger chains these days).
What we are seeing because of this mistrust is a ripple effect in part of the economy. Millennial-aged individuals increasingly refuse to deal with credit and prefer to deal in cash (and debit). That is a good thing in and of itself since they avoid interest, but healthy credit use leads to better credit scores, which makes things like buying a home possible. The average credit score for people under 30 is 625 and while your score may be better (check your own score for free here), lenders typically look for at least a 680 score to even look at a traditional mortgage application.
What many people don’t realize is that you can’t keep your money away from the type of banks that may need to get bailed out someday. If you have a retirement account, or contribute to a pension plan, or even just bank with a national brand, chances are your money is probably being used to feed the banking behemoth that makes the U.S. economy possible. Not that it’s necessarily a bad thing, without those banks we wouldn’t be nearly as comfortable as we are now, but when they get “too big to fail”, you get the 92% distrust figure seen among the younger generation.