Millennials & Money: Insights from an Often Overlooked Community
Millennials are receiving quite the attention from the media. We are often characterized as lazy and entitled. What I find to be true is that our generation has little trust in large institutions — from governmental offices to our large banks and financial institutions. We are steeped in our values and want our money aligned with our desires for a more sustainable planet. We are poised to catalyze big shifts in how financial services operate. What has yet to be adequately covered are the ways many millennials are left out and marginalized from our financial systems.
Growing up in a low-income immigrant community in Los Angeles, I witnessed and experienced first-hand this lack of financial access. In my community, most people did not have access to checking accounts or relationships with banks. They lived paycheck-to-paycheck, not earning enough to maintain an account free of monthly fees. For some, legal status required living in the shadows and that influenced their interactions with money as well.
Without access to financial services, raising families in the informal economy is an uphill battle. Most of the women in my community stay home to care for their children and find ways to make extra money by engaging in entrepreneurial activities such as selling food and clothing, cutting hair, cleaning houses, providing childcare and much more.
Without banking or credit cards, these communities have no credit scores and therefore struggle with basic needs such as renting a home or buying a car. Out of necessity, many operate in cash or trade, while some fall victim to predatory payday lenders. Despite being excluded from the formal economy, many in my community have extensive experience with savings and loans through their lending circles. Family, friends, and neighbors lent and borrowed money in small groups called “tandas,” with each person contributing a set amount each month and one person from the group taking the pot each month. This informal “line of credit” came in handy many times. I recall what a relief it was when a family member was able to use the tanda to help with the unexpected expense of repairing his car.
Eyes Toward the Future
In 2004, I was one of the fortunate few in my community to earn a scholarship to attend college. There I met other millennials who experienced money very differently. A classmate told me her parents opened a brokerage account for her when she was 16 and her money had been growing ever since. I had heard of a brokerage account in my economics course, but it was not a tangible concept for me, as having extra money to put into such an account was completely foreign. Other students referred to each other as “trust fund babies,” — another concept difficult to relate to. Despite the vast differences in our financial backgrounds, the promise of a top-notch education offered me the comfort that someday I would be able to earn enough money to enter the formal economy, open a savings account, start investing and saving for my future.
As a senior in college, I was ready to take on the world — and then the financial crisis hit. I graduated alongside 1.4 million millennials, who had taken on more student debt than ever before, amid the largest financial meltdown since the 1930s. We graduated to an environment with dramatically low wages, high unemployment, and a changing political landscape. The economic conditions made it incredibly difficult for millennials to find stable jobs, and as a result many of us went back to school, accruing even more debt.
I wanted to be a public servant — to engage in and work toward solutions for the income inequality that I knew was a big issue for our nation. With that in mind, I pursued a Master’s in Public Administration. During graduate school, I encountered the concept of Social Impact Bonds. I was excited to learn that private companies and public entities could form partnerships to lower recidivism in New York jails. Intrigued, I did more research. I learned about impact investing and was won over by the possibilities of shifting capital for good. In 2014, I read of a company turning guns into luxury jewelry, an endeavor that took weapons off the streets and helped fund gun-control advocacy. Still reeling from the Sandy Hook Elementary shooting, I could see that impact investing was a force for positive change and I had to be part of it.
Working to Shift Capital
Today, I have the privilege to work for a company that believes in, and works for, equity, diversity, inclusion, women’s empowerment, and social justice. We at Nia Impact Capital understand that for everyone to thrive, we must include everyone. This means having equal representation in leadership, empowering women with financial education, removing the stigma around lack of financial literacy, and making financial products accessible to those who have been traditionally excluded.
At Nia, we are activist investors, engaging our portfolio companies and other asset managers to move the needle on social change issues.
My background has influenced the work I do and the issues I care about, and my work has influenced my personal relationship with money.
I am clear I do not want my money sitting in the big banks causing crisis. Growing up amongst women without access to capital, I want my savings account to work for them, so I invest with CNote. I also provide loans to women through Kiva. Having benefited personally from non-profit organizations that help low-income communities, I value charitable giving and give annually to organizations improving college access to underrepresented students.
One of the most meaningful actions I have taken is gifting my parents an Individual Retirement Account. When I discussed opening an IRA with my stepfather, he was nervous because he was unfamiliar with the concept, but as I explained the benefits, he became excited about having savings for retirement. My parents have since been contributing to their IRA in small amounts and I try to match their contributions annually.
When I think of my parents or the many entrepreneurial women in my community, I see unlocked economic potential from a population more than willing to contribute to financial growth. For many millennials whose families and communities have been systematically excluded from the financial system, the cycle of exclusion will continue until we begin to focus on the benefits of bringing these communities into the formal economy.
I cannot speak for all millennials, though, from my view, millennials have similar goals to other generations. We want financial security, we want to contribute to the economy, and have the freedom to choose a job that brings us purpose and joy. This clarity around our values is often mistaken for entitlement, and yet millennials are uniquely positioned to help solve for some of the world’s most difficult challenges. We grew up in era of major technological transition and political change, and we have lived through the Great Recession of 2008. All these experiences have helped–if not forced us–to identify and assess our values. While we have varying backgrounds and paths on our money journey, as millennials we share a desire for a sustainable world. Our collective economic power is already shaping the way we invest our dollars and as that economic power grows, we must remember that the sustainable future we seek must also be inclusive.
Article by Erika Andraca. Director of Operations & Client Services for Nia Impact Capital, a woman-owned, women-led Registered Investment Advisor firm.
Prior to joining Nia Global Solutions, Erika worked as a Legislative Assistant for the City of Berkeley, where she oversaw community engagement projects and economic development research. Erika also has over five years of experience as a Legal Assistant for a private law firm in Berkeley, CA, where she handled civil litigation cases. Immediately after college, Erika had the opportunity to work with the Feminist Majority Foundation where she provided testimony before the California Commission on the Status of Women, for protections against predatory Crisis Pregnancy Centers.
Erika received her Master’s degree in Public Administration from San Francisco State University and her Bachelor’s degree in Government and History from Claremont McKenna College.