If one economic recession wasn’t enough for millennials to grapple with, why not throw another their way?
The economic hit of the coronavirus pandemic is emerging as particularly bad for millennials, those born between 1981 and 1996. This generational group that entered the workforce during the previous financial crisis is already behind on their career path and is currently struggling during the pandemic. Most millennials face bigger obstacles of accruing the wealth of older generations.
The 12.5% unemployment rate among millennials is higher than that of Generation X (born between 1965 and 1980), and baby boomers (1946 to 1964), according to May figures from the Pew Research Center. One main reason for this high unemployment rate amongst millennials is that some of the hardest hit industries, including leisure and hospitality, typically have a younger workforce.
Millennials have found it fundamentally more difficult to start a career and achieve the financial independence that allowed previous generations to get married, buy a home and have children. Research shows that even the most educated millennials are employed at lower rates than older college graduates and millennials’ tendency to work at lower-paying firms has caused them to lag behind in earnings.
As a result, the millennial generation has less wealth than their predecessors had at the same age, and about one-quarter of millennial households have more debt than assets, according to the St. Louis Fed.
Between February and May, millennials got hit the hardest in terms of unemployment, according to the chart below by St. Louis Fed. Millennials are now at risk of falling further behind because they entered the pandemic in a weaker position than older Americans.
However, it is important to keep in mind that millennials do have some advantages on their side as they fight this second recession. A larger percentage have college degrees than previous generations, which could pay dividends over time. They will also help fill gaps in the workforce as the large baby boomer cohort retires. The young workers behind them, members of Generation Z, who this year are 23 and younger, have even higher rates of unemployment and less experience to buffer them from the economic fallout of the pandemic.
For millennials who have been rocked by this second economic recession, it is important to take a step back and start re-evaluating their careers and financial lives. It is also crucial to start early, set up a plan, and stick to it to see it through in the long run. Building up your wealth is crucial, especially while you are stuck at home during the pandemic and economic recession. Putting aside even just a little bit of money each week or month will grow over time due to compound interest. Think about investing some of the money you might have spent on going to the movies or out to eat or having some of your paycheck put directly into a different account that is solely for saving. However, make sure you still treat yourself to a morning latte or favorite takeout from time to time – you CAN save for your future without sacrificing all the little extra things that make you happy.
Now is the time for millennials to consider seeking financial help and guidance to navigate these bumpy waters and prepare a plan to help them succeed financially in the long term. If you have any questions or concerns, please reach out and we would be happy to help create a financial plan to suit your individual needs.