Millennials Face Their Second Recession
Forty percent of millennials say the pandemic will likely cause them to delay payments on their debts. Does that include you? Time to take action.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter
What’s worse than living through two recessions? Getting hit with the second recession just as you’re recovering from the first. Although millennials aren’t the only generation facing financial challenges, the severe economic downturn triggered by the COVID-19 pandemic is hitting us particularly hard.
According to a survey in early April by Kantar, a consulting firm, 78% of millennials say their household income has been or will be impacted by COVID-19, compared with 71% overall. And while I’m grateful I’m still earning a paycheck and my finances have been stable, I can’t say the same for my sister or my friends. Making matters worse, a lot of us are paying off student loans and other debts.
The average non-mortgage debt for millennials in the second quarter of 2019 was about $25,600, according to Experian’s annual State of Credit report. A separate Experian report found that roughly 11% of millennials were 30 days past due on payments. Now, 40% of millennials say the pandemic will likely cause them to delay payments on their debts, according to a survey by MassMutual. If you fall into that group, you need a plan.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
What to do. The first thing on your to-do list: Call your creditors, explain your income situation, and ask about options for repayment (see Get Help With Your Bills). After my sister told her credit card issuers that she had been furloughed, she was able to defer payments for April and May with no penalty or late fees. However, the balances are still accruing interest.
Other options include asking for a reduction in your interest rate or your minimum payment, says Samantha Gorelick, a certified financial planner at Brunch & Budget. For example, American Express will lower cardholders’ minimum monthly payments, waive late-payment fees or temporarily lower their interest rate. If you can afford it, reducing your interest rate or minimum payment may cost you less in the long run than deferring payments altogether.
Check your credit reports to make sure your information is being reported correctly. Under the CARES Act signed into law in early spring, lenders are required to report that consumers are current on their loans if they’ve requested coronavirus-related relief. Ordinarily, you can get a free report from each of the credit bureaus—Equifax, Experian and TransUnion—only once every 12 months at www.annualcreditreport.com (opens in new tab), but through April 2021, you can get a report once a week.
After you’ve deferred or reduced loan payments, Gorelick recommends you stash the money that you don’t need for essentials in an emergency fund. Because I can cover my necessities, that’s what I did with my stimulus check.
If you’re feeling overwhelmed, consider reaching out to a financial planner. The Association for Financial Counseling and Planning Education is offering free virtual financial coaching sessions as part of their COVID-19 response. To sign up, go to https://yellowribbonnetwork.org/afcpecovid19 (opens in new tab).
Once you’ve got your finances in order, bolster your cash reserves so you’re prepared for the next recession (or other setback). Set up an automatic transfer from your checking to your savings account so you’re saving at a regular pace. After you’ve replenished your emergency fund, increase contributions to your retirement plan.
Finally, if your credit score has taken a hit, work on rebuilding your credit. Pay your bills on time, and try to keep the amount you owe on your credit cards as a proportion of your total credit limit—known as your credit utilization ratio—under 30%.
Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. She's now a staff writer for the magazine and helps produce content for Kiplinger.com. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher.
-
-
A Financial Review in Early 2023 Can Optimize Your Strategy
Look to build savings, reduce risk, minimize taxes and ensure a successful retirement by reviewing your budget, contributions, allocations and beneficiaries.
By Ken Nuss • Published
-
How to pick the best robo advisor for you
Kiplinger's guide to the best robo advisors to fit your needs.
By Kim Clark • Published
-
New RMD Rules: Starting Age, Penalties, Roth 401(k)s, and More
Making Your Money Last The SECURE 2.0 Act makes major changes to the required minimum distribution rules.
By Rocky Mengle • Published
-
How to Pay off Credit Card Debt
Making Your Money Last Keep up with credit card bills using these tried-and-true strategies.
By Ellen Kennedy • Published
-
Bear Market Strategy for Millennial Investors
A focused, goal-oriented approach to investing can help millennials navigate a bear market.
By Rivan V. Stinson • Published
-
Rent vs. Buy: Sometimes Renting is Better
Personal finance experts have long held that homeownership is a key step to building lasting wealth. How does that hold up in a pricey real estate market?
By Rivan V. Stinson • Published
-
6 RMD Changes We Could See This Year
Making Your Money Last Congress is considering two bills that would make major changes to required minimum distributions. Could your RMDs be affected?
By Rocky Mengle • Last updated
-
A Kiplinger-ATHENE Poll: Retirees Are Worried About Money
Making Your Money Last Concerns about recession, inflation and health care costs weigh on retirees and near retirees.
By the editors of Kiplinger's Personal Finance • Published
-
Protect Your Retirement Income from Inflation
Making Your Money Last Costs are rising, and the market is bearish, but that doesn’t have to jeopardize your long-term security.
By Sandra Block • Published
-
Earn More with a CD Ladder
Making Your Money Last With rates crawling up, one way to keep your earnings on track is to spread out your cash.
By Rivan V. Stinson • Published