How millennials can get through Covid-19 financial worries

The Covid-19 situation has renewed concerns among millennials about their financial future.

Compared to previous generations, many millennials entered the workforce just before or soon after the financial crisis in 2008, which affected their ability to get a good salary or even a full-time job. 

Similar concerns are showing up again in how millennials are reacting to the Covid-19 situation. While surveys here are still scarce, research in the United States by analytics firm First Insight found that millennials are already changing their spending habits and preparing to shop differently. 

About half (54 per cent) of millennials say the coronavirus spread has impacted a purchase decision, more than any other age group, and 40 per cent say they have cut back on their spending due to the coronavirus.

Prosper Insights & Analytics’ March monthly survey of over 7,500 consumers in the US similarly shows short-term behavioural changes among millennials, who are shopping in stores less, buying online more, stocking up on basic supplies and shopping at less busy times.

While millennials in Singapore could be different, they seem may well be reacting to the coronavirus situation even more strongly. Millennials here are less satisfied with their lives than their peers around the world and more pessimistic about Singapore’s economic outlook, according to the Deloitte Millennial Survey last year, so Singaporean millennials may have greater worries about Covid-19 than people in other places. 

PREPARE WELL FOR VOLATILITY AND UNCERTAINTY 

While the economic outlook may seem challenging, the key to doing well amid the current uncertainty is to maintain a positive attitude and prepare well financially. 

Positive emotions are a key resource for people during the coronavirus crisis, University of Melbourne psychology professor Lea Waters told The Guardian, because they can increase resiliency, increase immunity and help people think more clearly. 

You can gain a positive outlook by savouring small moments at home, strengthening your connections and looking for the good in others. 

Celebrate when you avoid the morning commute and chat with friends on Zoom, for example. 

You can also check out YouTube videos of everything from toddlers helping their neighbours to musicians playing entire symphonies from separate locations.  

Financially, said asset manager Schroders, the pandemic is not all cause for darkness and despondency for millennials. “A market correction can even be a good thing in the long run. While the stock market has been quick to react, history shows it has a tendency to bounce back strongly over time.” 

The Nasdaq stock exchange in the US similarly noted that “the recent sell-off offers brilliant opportunities in the equity market for millennials looking to retire comfortably with financial independence. Amid fears of an imminent recession and global economic slowdown, millennials may take refuge in coronavirus-battered tech stocks that have robust fundamentals. These stocks have better prospects once the coronavirus crisis eases.”

3 STEPS TO TAKE

There are three steps that can help you prepare your finances well and take advantage of the opportunities. 

First, look at your spending and see what you can cut back. Spending less can be helpful at all times and may be necessary if you face a pay cut or job loss. 

While it’s unlikely that you will cut your Netflix subscription when you are at home more, you can improve your culinary skills and cook meals at home or look for lower-priced items online rather than making impulsive purchases at the mall. 

Not joining the crowds in panic buying can improve your finances, and joining the trend towards buying high-quality “like-new” fashion can reduce costs too. These changes can help in the longer-term as well.

Next, see if there are ways to cut your expenses for loans or other financial services. If you have a mortgage, for example, refinancing at the current low rates could cut your monthly costs. Revising insurance policies so that they meet your actual needs, rather than paying more for something you were sold by an agent, can help too. 

Finally, keep investing. “One thing you absolutely do not want to do is sell any stocks or stock-based investments as a result of this panic,” investment advisory The Motley Fool advises, “especially in retirement accounts that you won't need for several years.” 

Indeed, one of the worst things you can do after stock and bond markets crash is to sell shares or bonds at a low price and stay out of the market. 

Millennials have a long time until retirement or until they need to fund their children’s university education, so there is time to wait for markets to rebound. 

Historically, stock markets have gone back up after a crash, both during recent times and even over the past several centuries. 

While you will need to stop investing temporarily if your income disappears, do not sell in a panic. Instead, keep investing regularly, as long as you have a salary so that you do not miss out on the upturn. 

While the economic and financial outlook may be uncertain, a positive attitude, prudent spending and careful investing can lead to a better financial future, even amid the uncertainty.