Young adults entering the work force and managing wages for the first time today face a financial services marketplace that is markedly more complex than the one their parents first encountered as young adults. Traditional bank and credit union business models are under stress, non-bank providers now offer an array of alternative products for managing cash, and national specialized providers dominate marketing and underwriting of most credit products. As a result, many individuals adopt an “a la carte” approach to financial services, in which they access a range of services from specialized providers. There are trade-offs inherent in this approach: consumers may be able to maximize the price or functionality of specific services being accessed, but this approach also makes it more challenging to develop a unified understanding of a household’s finances or manage one’s financial life in a coherent way.

The heavily fragmented nature of their initial relationships with financial services providers has implications for how youth will build their financial capability – the set of knowledge and practiced behaviors that will help lead them to positive financial outcomes. For young people, the gradual development of financial capability throughout their first encounters with the financial services industry can greatly improve their prospects for building savings and their ability to establish credit. Institutional supports for saving have been one casualty of an “a la carte” approach as cash management products offered outside traditional banks often come without savings features or modeled savings behavior and as credit-granting has been largely delinked from saving for down payments. Additionally, tighter underwriting standards, coupled with recent legislation, may delay young adults’ access to mainstream loan products: this delay may protect young people from early negative experiences with credit, but young people still need onramps to healthy credit usage and the development of positive credit histories.

A more general consequence of product complexity, and of the fragmentation and transience of early financial relationships, is a failure to generate “anchoring relationships” with trusted institutions, such as traditional depositories, through which young people could reliably learn about and obtain the range of services they are likely to need. While their parents’ financial relationships are likely to have become similarly varied and specialized over time, fragmentation early on may be having developmental impacts on the way young people learn, and make decisions about money.