As if the 2008 recession wasn’t rough enough, hardships struck millennials again in 2020. Already facing professional and financial challenges, including a dismal job market, sky-high levels of student debt, and soaring living costs, the coronavirus pandemic exacerbated the growing “K-shaped” gap within this generation. The result is a disparity in which the millennial-rich and the millennial-poor will recover at different paces.
Pre-pandemic, many millennials were already strapped into a lower income bracket. Millennials with children are now among those in the generation suffering the most during the pandemic. About 40% of millennial parents are seeing increases in hardships due to heightened food and housing insecurity and employment cutbacks to meet caregiving needs during the pandemic’s school closures.
Meanwhile, there’s a group of wealthier millennials spending less of their disposable income than they would have in non-COVID times. Millennials with college degrees and those who already had a sound financial backstop pre-2020 are weathering the storm better than their peers. Many are tucking away excess cash that typically would’ve been spent on dining out, social events, or plane tickets.
Millennials are experiencing a K-shaped recession. Some millennials graduated from college, built their careers, purchased homes, and are saving for retirement. However, many are struggling due to rising tuition fees, higher costs of living, stagnant wages, and mass layoffs in industries like hospitality.
The pandemic will have an even more pronounced impact on this generation over the next five years. About one-in-four millennials who are saving for retirement, an emergency fund, or other future goals have at least $100,000 or more, according to a report from Bank of America published in January, prior to the pandemic. The same report found 27% had nothing saved at all.
Millennials need to uncover some different financial planning behaviors, and since time is on their side, their financial status could recover over the long haul. Learning how to manage finances for today and tomorrow requires some expert strategies, and we can help. Contact us today, and let’s get you on the top half of the “K.
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