How Covid-19 is affecting millennials financially

Millennials and Gen Z worst affected by pandemic

YOUNG people might be less at risk of contracting the novel coronavirus but suffer some of the worst effects of its financial fallout.

The answer to how best to mitigate the damage does not seem to lie in more financial education; rather, nurturing resilience will protect the youth from future crises.

Credit reporting agency TransUnion’s latest financial hardship research on the impact of Covid-19 shows an increase in job losses since the beginning of the lockdown: 19% of millennials have lost their jobs, which is an 8% increase since April, compared with the average of 16% across all age categories.

More than eight out of 10 (83%) of all respondents have been affected financially, and 91% are concerned about their ability to pay their bills and loans. If the rate continues, job losses are projected to reach seven million, which could see up to half of the country’s workers unemployed.

Millennials and Generation Z are affected the worst, and their financial positions have steadily declined. At the end of April, TransUnion found the household incomes of 84% of

South African millennials had been negatively affected by the pandemic, compared with the global average of 76%, and compared with 79% for all other generations in South Africa.

The situation has since worsened, with 85% of millennials and 81% of Gen Z affected, compared with 87% of Gen X and 69% of Baby Boomers.

Most respondents seem to have a plan. Their bills shortfall has decreased from R7 542.90 to R7 098.40; 51% have cut back on discretionary spending, and one in five had made payment holiday arrangements with their lenders and service providers.

The data offers hope, however, because millennials may be better equipped to carry the burden because they are facing the economic fallout as they approach their peak earning years.

Having a plan and focussing on what matters helps through tough times, says Shelley van der Westhuizen, the head of corporate financial well-being and engagement at Alexander Forbes.

“In these challenging times, it is often a challenge to remember that there is life on the other side of the problems, even if they seem insurmountable.”

She says one of the opportunities the economic crisis presents is to build courage. “This is what taking control is about – getting ourselves into the best position possible to get through the current challenges and making sure that we’re better prepared for the next one.”

Most people are struggling financially, which is why it is important to know where you spend your money and what resources you have.

In South Africa, two-thirds of millennials have dependent children living at home, compared with

48% for other generations, and relationships with family and peers guide their financial outcomes.

Across all demographic levels, those with a plan are better off, financial vulnerability studies show.

If significant others, including children, are encouraged to set family financial goals, it will be easier to say no when they ask for things that haven’t been planned for. In this way, parents can explain their spending decisions and will be empowered with reasons to say no when they need to, based on agreed goals and plans.

“Do you discuss money in your family, is there an agreement around the budget, have you co-opted the family to agree to it, share objectives, made trade-offs?”

Van der Westhuizen says capitulating to children’s demands becomes a trap – and sets them up for failure. “If children are involved in money matters, age-appropriately, that contributes to trust. Instead of worrying about money and having it control you, it’s important to focus on what you can do. If you don’t know where you are and what is doable, the default is to try to accommodate as a parent.”

Knowing your credit status is key to taking control. Lee Naik, the chief executive of TransUnion Africa, says consumers looking to minimise potential negative impacts of the pandemic on their credit profile can visit TransUnion’s Covid-19 website.

“Until the end of July, TransUnion is offering you a free credit score, report and profile alerts to help you make the right financial decisions and to protect your credit health.”