Gen Z and Millennials Increasingly Positive About Shrugging off COVID-19’s Impact on Household Finances
Despite bearing much of the negative economic impact of the pandemic, Gen Z and Millennials are becoming less concerned about the long-term impact of COVID-19 on their household finances, according to recent research from global information and insights provider TransUnion.
In its Consumer Pulse study, which has been tracking the financial impact of the pandemic, TransUnion found that young people are increasingly turning their thoughts to planning for their financial future as the national mood lifts and vaccinations are now being offered to anyone over 18. In fact, seven in 10 (70%) Gen Z respondents and more than half (56%) of Millennials think their household finances will fully recover in the next 12 months.
Outside of their finances, younger people remain more upbeat overall too, with increased optimism about the future among Gen Z (72%, up from 63% in Q1) and Millennials (64%, up from 61% in Q1) alike. Across all age groups, 57% said the same.
With the expectation of more stability, appetite for credit is likely to be healthy. Among the UK population, on average one in three (32%) intend to apply for new credit or refinance existing credit in the next 12 months, but this rises to 53% for Gen Z and 47% among Millennials. Meanwhile, a majority of Gen Z (51%) said the pandemic has made them more open to using credit in the future.
Across all age groups, consumers say they are most likely to apply for a credit card (11%), personal loan (8%) and a new car loan or lease (8%) when they borrow money next.
“After treading water during the low points of the pandemic, newfound optimism means people will be starting to look at their financial future again,” said Kelli Fielding, managing director of consumer interactive at TransUnion in the UK. “Our data shows many will be looking to new lines of credit to help support them in their life goals over the next 12 months, particularly younger people. Lenders have a key role to play in encouraging consumers to engage with and monitor their credit report and score. Making this kind of information as widely available as possible will help businesses transact with confidence and support customers with access to financial products that are tailored to their needs.”
While optimism is booming, current household finances may be slightly behind the curve by comparison, remaining relatively stable. There is a slight increase from 40% to 43% among those who report their financial life is going as planned when comparing Q1, 2021 to the present day.
Sam Welch, director of banking at TransUnion in the UK, said: “Responsible lending, based on the right information, is crucial to fuelling a sustainable recovery for consumers and businesses alike. Whilst it’s great to see increased optimism, the road ahead remains an uncertain one. Consumers are starting to spend again as lockdown measures continue to ease, and the summer may see a boost in leisure spending with travel restrictions driving staycations in the UK. However, the financial polarisation we’ve seen as a result of the pandemic is likely to be amplified as financial accommodations come to an end in the months ahead. Lenders need to prepare for that by ensuring they have an accurate and comprehensive understanding of each customer’s situation.”
One in five (20%) UK households say they expect to be unable to pay at least one of their current bills and loans in full, though this is down from 27% in Q1. The main repayment strategies for those falling behind with their payments are to dip into savings (27%), pay a partial balance (25%), borrow money from friends or family (19%), take a payment holiday (15%), open a new credit card (15%) or take out a personal loan (15%).
Unless otherwise stated, all figures relate to TransUnion’s Consumer Pulse research (formerly the Financial Hardship Study), based on research conducted among 1,027 adults between 2-3 June 2021.
In TransUnion’s Consumer Pulse Study, generations are defined as follows: Gen Z, born 1995–2002; Millennials, born 1980–1994; Gen X, born 1965–1979; and Baby Boomers, born 1944–1964.