Happy new month folks!
I don’t know about you but I can’t believe it’s November and we’re still dealing with a global pandemic. Personally, I thought this would all be over in about three months tops, but then again, there are so many moving parts to a pandemic, that when I actually think about it, three months may have been a little too ambitious.
As the year begins to wind up, have you been thinking about what 2021 will look like for you? Financially? Personally? Emotionally? What will have changed as a result of the pandemic? What lessons have you been taught?
The impact of the pandemic has shifted our basic understanding on so many things, such as, how we work, how we socialise, how we travel. More specifically, as millennials, the financial impact of the pandemic has forever changed how we think of money. Specifically, how we save, how we spend and where we spend. Today, we’re going to talk about 3 ways the pandemic has changed the future of personal financial management for millennials.
Increase in millennial financial conservatism
As we have all witnessed the COVID-19 pandemic has had disastrous effects on the global economy. While we have witnessed a global pandemic killing thousands of people, we have also witnessed a global recession. With millions of people worldwide losing their jobs, having to take pay-cuts, and/or being furloughed. From a business owners perspective, we have also witnessed small businesses fall to their knees, with business owners paying staff from their savings, loan defaults skyrocketing and so much more. It’s been traumatic to say the least.
The way this trauma has reflected across generations, shows that millennials have been the most impacted. A 2020 study by Morning Consult showed that millennials were the generation most likely to say that their finances had been impacted by the pandemic. With 39% of millennials admitting to experiencing a major financial impact caused by the pandemic, in comparison to their parents’ generation, where only 15% admitted to being financially impacted in a major way by the pandemic.
As a generation that has witnessed huge financial volatility, it’s no wonder millennials going into the financial market will approach with caution. For a generation that has witnessed two major economic crises, money has become a more valuable asset to millennials and it won't be surprising to see them starting to take on a more conservative approach towards their finances and investments moving forward.
Increase in financial planning and saving culture across millennials
If the pandemic has taught us anything, it’s that savings are vital. One day the economy will be fine, the next day, it’s on its knees. I’m sure those millennials that didn’t have a financial reserve during this time have felt the full financial brunt of the pandemic and as a result, experienced or are experiencing financial trauma.
Galen Buckwalter, defines financial trauma as a dysfunctional reaction to chronic financial stress. He shares that financial trauma is caused when expenses outweigh income over a long period of time and basic necessities such as housing, food and healthcare are threatened. Essentially, describing how many homes and individuals were impacted during the pandemic. One of the ways Buckwalter advises overcoming financial trauma is planning for the future, in the form of savings.
You see, trauma triggers our fight-or-flight response and pushes us into survival. In this case, in order to survive and or avoid financial trauma in future, millennials having witnessed two global recessions are now being involuntarily pushed to adopt a more rigorous saving culture as a way to mitigate future financial traumas.
Are you a millennial? Have you found the pandemic has shifted how you think about money?