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Financial Planning > College Planning

COVID-19’s Economic Fallout Hits Millennials Hard: Survey

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The coronavirus pandemic has created unprecedented havoc in the economy and the job and financial markets, affecting nearly all households and adults, especially millennials and Gen Xers, according to a recent survey.

“The research revealed that the COVID-19 crisis is touching almost everyone, regardless of income, and delivering an especially hard blow to younger Americans during their asset accumulating years,” Jeff Andreasen, president of aQity Research & Insights, said in a statement.

The aQity survey looked at some of the tough financial decisions U.S. households have made and expect to make because of the pandemic. It was conducted in mid-April, about a month after states started announcing shelter-in-place orders, among 2,002 Americans 25 and older with 2019 household income of $35,000 or more who identified as the sole or a joint financial decision-maker for the household.

The survey found that 59% of households that earned less than $150,000 in 2019 had felt at least some financial impact from the recent economic downturn, while households that earned more than $150,000 were feeling few if any effects.

At the same time, 45% of U.S. households reported a job loss, a closed business and/or reduced pay because of COVID-19. This number rose to 60% for the millennials and 53% for Gen Xers.

Meeting Expenses 

Consumers started making some difficult financial decisions as of the end of April, the survey found.

Two-thirds of respondents reported pulling back on daily expenses, one in five had applied for unemployment and about the same number were letting credit card debt pile up to preserve cash.

If the crisis does not ease in the next two to three months, reliance on these methods will more than double, according to aQity. And although the survey found that most Americans had yet to cut back on their college savings or stop college loan payments, these actions appeared to be likely “next steps” to hold onto income. (Under the Coronavirus Aid, Relief and Economic Security (CARES) Act, payments on federal student loans are suspended until Sept. 30.)

Eighty-six percent of participants with IRAs or workplace defined contribution accounts said they were maintaining their retirement savings contributions, with only some 2% having started early withdrawals from these qualified savings accounts.

That’s for the time being. If their financial situation does not change in the next two months, 24% of respondents said they would likely cut back on retirement contributions, including at least 34% of millennials. Fifteen percent of the entire sample and 24% of millennials said they would likely take early withdrawals from a DC plan.

Predictions for the Future 

Sixty percent of survey respondents looked for the pandemic in the U.S. to be under control within six months. Roughly half of those who had lost a job or pay expected to be working again or fully paid within the next two months.

However, some two-thirds believed a full recovery of the unemployment rate, stock market and U.S. economy overall would take at least six months or even more than a year.

Investors overall were divided in their predictions about the performance of the stock market in the next two to three months, according to the survey.

Millennials expected further short-term losses instead of gains by a 2:1 margin, while baby boomers and older adults predicted improvement.

According to aQity, millennials’ more pessimistic view and the overall effect they have experienced likely explain their recent reactions to stock market volatility.

During the first month of shelter-in-place orders, 35% of millennials reported making one or multiple shifts in their investment strategy: 31% moved to more conservative investments and cash and 15% moved to more aggressive strategies.

By comparison, 76% of older-generation households maintained a long-term investment strategy with no changes.

“While most households are finding ways to cope with the financial impact of the pandemic and are optimistic that the virus may be under control relatively soon, the long-term impact on investment markets and the overall economy will be felt much longer,” Andreasen said.

“As a result, Americans, especially the millennial generation, are not likely to be out of the woods financially any time soon and may look for new ideas and guidance for recovering in the new normal.”

Future Personal Behaviors 

The survey showed that the pandemic’s effect on Americans will extend beyond the economic and financial difficulties to their personal and everyday habits in the post-pandemic world, but with generational differences.

Fifty-nine percent of millennials said they would start or continue saving for future emergencies, compared with 41% of all respondents.

Gen Xers were the most likely to say they would continue washing hands more frequently, wearing face masks and having sanitizer on hand. Moreover, 67% said they would continue to avoid shaking hands, and 50% would not attend large events, even after the pandemic is past.

Millennials appeared to be much more comfortable resuming social behaviors in the post-COVID-19 era, with only 48% saying they would avoid shaking hands and 37% avoid large events.

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