Finally, the author shares a personal anecdote: “My father’s first house cost him 20 months of his salary. My first house will cost more than 10 years of mine.”
And what about things like socioeconomics and race? Millennials are neither monolithic nor homogenous, and when we start talking about any large group as though they are, someone is getting overlooked. In this case, we can’t talk about millennials without addressing the fact that one-half of us are minorities. (Fun fact: Lifesaver’s founders identify as minorities.) For many millennials, their only safety net is their parents—a safety net that, for obvious reasons, is not equally available. As Hobbes states, “From 2007 to 2010, black families’ retirement accounts shrank by 35 percent, whereas white families, who are more likely to have other sources of money, saw their accounts grow by 9 percent.” If that’s not enough, consider that, “According to the Institute on Assets and Social Policy, white Americans are five times more likely to receive an inheritance than black Americans—which can be enough to make a down payment on a house or pay off student loans. By contrast, 67 percent of black families and 71 percent of Latino families don’t have enough money saved to cover three months of living expenses.” And lastly, and perhaps most shockingly, “Every extra dollar of income earned by a middle-class white family generates $5.19 in new wealth. For black families, it’s 69 cents.” So, to conclude that millennials have even been equally disadvantaged would be a grave misunderstanding of our present reality.
But this post wasn’t meant to substitute reading Hobbes’s article (which is seriously one of the most visually fascinating pieces of journalism we’ve ever had the pleasure of reading), nor was it intended as an indictment of America’s corporate or financial sectors. In examining and thinking about the conditions whose cumulative effect precipitated our need for Lifesaver, we hope to bring to our users (and to ourselves, since Lifesaver was first envisioned as a solution to our own problems) a platform with the potential to revolutionize the way people engage with their finances.
In first putting forth the question of what it might mean to connect people with the best financial products and services, we engaged in a months-long deep-dive into the full spectrum of offerings from large banks, community and regional banks, credit unions, and fin-tech (financial technology) companies. Taking into consideration everything from companies’ white paper and quarterly reports, balance sheets, mission statements and company history, to community feedback and press coverage, more often than not we found that the most features, savings, earnings, and security could be found right at home. Small- to medium-sized community banks and credit unions, often overshadowed by much larger institutions, are right now creating innovative financial products designed to side-step and overcome the very problems described in Hobbes’s article.
In other words, we realized that we, and pretty much everyone we know, were leaving money on the table. With nearly 7,000 banks in this country (and many more federal credit unions), that most people can only name 10 hints back to the problem discussed earlier. It’s not enough to ask, “What are my best options?” or even, “What options exist?”. A third, deeper question must often first be answered: “How do I even go about finding out what my options are?”
This may lie at the heart of the issue. We all know that some people are born into settings in which the privilege of an answer to this question can come pretty early in life. Some people may recall opening their first savings account at age 9. Others may recall growing up hearing about their college fund. Others still may have been born with a trust fund, and/or with family friends who work on Wall Street. But for everyone else, to even ask the question, “What should I do with my money?” isn’t so obvious, since none of us come innately into the real world knowing that anything can be done with money besides using it to purchase things. This is especially significant when we consider the financial realities of minorities and people in rural communities, as outlined in Hobbes’s article.
But think back on the issues raised in Hobbes’s article. Did you know that some community banks offer savings accounts with interest rates approaching 1%, with $5 monthly fees that can be waived with a $25 average monthly balance? Did you know that these same banks also offer loans that are literally impossible to default on, and whose sole purpose is to build your credit? Did you know that there are local credit unions offering checking accounts that earn dividends of 4.25% APY? That’s more money than you’d get with a five-year certificate of deposit from any large bank in America. Did you know that many community banks offer savings accounts that match a percentage of all interest earned on accounts, and donate that money to a local charity of their customers’ choosing? In this case, a bank is essentially paying out to their customers and to their community when people set money aside for the future. There are even financial products meant for those who are either contractors or self-employed, for whom long-term financial planning for things like healthcare and retirement can be both more complicated and much more expensive. To top it all off, some of the most useful and consumer-friendly financial institutions we’ve found are headquartered in historically lower-income urban centers and rural communities.
So, how can we better connect these institutions with the people who need them the most?
This is what we mean when we say that Lifesaver takes the guesswork out of personal finance. We created Lifesaver to work with people through all three of the most fundamental questions of personal finance:
1. Where do I find my options?
2. What are my options?
3. Of my options, which are the best for me?
This is where we begin. More importantly, this is what we believe is missing from any number of the websites or platforms that purport to offer the keys to financial health. Millennials aren't screwed, but it's evident that something has been missing from the world of personal finance all along. Real people and real communities have long been overlooked in favor of those with the privilege to know which questions to ask, and the wherewithal to capitalize on the answers. With a smartphone in nearly every pocket in America, healthy and diversified financials should no longer be something esoteric, mystical, or unapproachable.
Get Lifesaver today, and join us as we continue to put financial health at the fingertips of people everywhere.