Millennials have faced numerous economic challenges throughout their lifetimes. The 2020 recession is yet another one.
This pandemic-driven economic downturn is likely to have an especially profound negative impact on this demographic, according to an analysis by the Federal Reserve Bank of St. Louis. Here's why.
1. Many millennials haven't recovered from the Great Recession
The Great Recession started at an especially bad time for millennials, many of whom were entering the job market just as the economy imploded.
Sadly, many people in this age cohort still haven't gotten back on track after this financial disaster during their formative years. The Federal Reserve's data indicates that older millennials who were born in the 1980s are the only generation to have actually seen their financial situation get worse between 2010 and 2016.
2. Most millennials don't have a financial buffer
How you fare during a recession depends largely on whether you have a financial buffer to see you through the difficult days. Most millennials don't have one.
Millennials have less household wealth than other generations did at the same age. Around one in four millennial-headed families actually has a negative net worth. Just over 16% of millennials said they'd be completely unable to find money to cover a $400 expense -- which means not only that they don't have it in the bank, but also that they couldn't access that much money by selling assets, borrowing, or using credit cards.
With almost no money saved for hard times, millennials who face a job loss or income cut could be in dire straits during the 2020 recession.
3. Unemployment is especially high among the young
Many are already facing job losses, and more could be coming.
Around 5.56 million millennials became unemployed between February and April 2020. Some of the hardest-hit industries -- such as the hospitality and leisure industry -- tend to employ a disproportionate number of young people.
The Federal Reserve pointed out that many of the millennials who have lost their jobs already or who are most likely to lose them in a recession are also among the least likely to have a financial buffer.
You can overcome these challenges
While this is a lot of bad news for millennials, the good news is that you do have options to try to shore up your financial security despite the forces working against you.
First and foremost, take advantage of the benefits available to you, including expanded unemployment benefits. Understand your rights, including expanded paid sick leave and protections against eviction and foreclosure authorized by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Talk with creditors about a payment plan if you're having trouble.
After you've done that, evaluate your financial situation and see if you can find opportunities to save and invest in building your financial cushion. A recession could result in a stock market downturn that presents buying opportunities, for example, while today's low interest rates could perhaps enable you to refinance debt and free up cash to build an emergency fund.
Undoubtedly, coping with yet another economic disaster will make life harder for young people. But with some sacrifice and creative budgeting, you can hopefully come out stronger in the end.