The coronavirus pandemic has caused the most substantial economic rift to the U.S. economy since the Great Recession of 2008. Due to quarantining policies and business shutdowns, the nation’s unemployment rate reached a staggering 14.4% in April 2020, according to Pew Research.
Pew Research added that this economic crisis has been harder on younger generations:
“The unemployment rate among young adults ages 16 to 24 (25.3%) exceeded the rate among other workers by a substantial margin in May… A key reason is the concentration of young adults in higher-risk industries, such as food services and drinking places, that were more affected by the need for social distancing and government-mandated shutdowns.” – Pew Research Center
With this in mind, economic experts have predicted this crisis may lead to a new generation of “supersavers.” Young people who may have believed themselves to be financially secure have suddenly been laid off. They may have started dipping into their savings account and worrying about their future. This worry leads to saving, and they may carry that mindset with them throughout their lives.
The same happened after the Great Depression of the 1930s and the Great Recession of 2008. According to a 2019 Gallup poll, more than 60% of Americans still consider themselves savers rather than spenders, which was not the case before the economic crisis of 2008.
So, how will COVID-19 reshape the saving habits of the younger generation? Let’s break down a few of the key ways this unforeseen economic crisis may change the saving mindsets of our nation’s younger generation.
Increase in emergency funds
A significant shift we may see in younger generations following this economic crisis is a higher allocation of savings to emergency funds. Young people may not have experienced an unprecedented emergency prior to COVID-19. This economic crisis is significant enough to spur a mindset shift in the younger generations.
Going forward, they’re likely going to be ready for whatever may come. Because, really, who could have seen a global pandemic coming?
Less luxury spending
After the Great Recession of 2008, people started saving rather than spending, and they didn’t stop. Enter COVID-19, and this trend is undoubtedly cemented in the younger generation’s collective psyche. This means saving on inessential expenses will be king for a long time to come.
Entertainment and luxury expenses such as travel, going out to the movies, dining at fancy restaurants, and splurging on the latest tech will be put on the back burner in the foreseeable future.
Pursuit of “side hustles”
Millennials and Generation Z have experienced a massive recession and pandemic-caused economic crisis during their formative years. Not only will these generations save more, but they will also work harder to build financial security for themselves. That might mean taking on more and more “side hustles.”
Side hustles are any gig you do on the side of your primary source of income to earn a little extra. Side hustles not only help you make more money, but they also protect you in case you lose your main stream of income (as many did, thanks to the pandemic). This concept has been around since 2017, and it probably isn’t going anywhere anytime soon.
Today, it’s all about having multiple streams of income. The popular concept is that most millionaires have at least seven. While that may not be possible for most of us, we can expect it to be common for the younger generations to have two, three, four, or even more income streams.