Savings Used to Cope with Financial Impact of COVID-19 as Pandemic Presents New Barrier to Property Ladder for Millennials
One in five millennials (22%) have had their dreams of home ownership dashed, as they re-purpose savings set aside to cope financially day-to-day.
This is according to new weekly research from TransUnion – designed to track the financial impact of the COVID-19 pandemic – which found the ways that 26 to 40 year olds are preparing to manage their income shortfall; including tapping into savings (35%), borrowing money from a friend or family member (22%), and refinancing (19%).
And this age group has felt the blow more than most, with seven in 10 of them (72%) already affected financially by the pandemic. This is higher than their parents’ and grandparents’ age groups (58% and 39% respectively) but slightly less than Generation Z, aged 18 to 25 (78%), although many of those are still supported by their family, live at home and have less to lose financially.
Kelli Fielding, managing director of consumer interactive for TransUnion in the UK comments: “Undoubtedly, the COVID-19 pandemic has impacted all of our finances – in the biggest way since the economic crisis of 2008. Millennials have been hit hard, however, with nearly half of them (46%) having had work hours reduced, and over a quarter (26%) having a partner that’s lost their job.”
What’s more, eight in 10 (78%) millennials say they are currently concerned about their ability to pay bills and loans. Among these, four in 10 (39%) expect this to impact them in the next two-four weeks – and over a third (35%) estimate the shortfall will be between £500 and £1000.
Breaking this down by outgoing bills, around four in 10 (37%) millennials are worried about paying off their credit card bill and a quarter a personal loan (24%).
Kelli Fielding adds: “There is support for those who are struggling financially as a result of COVID-19, with banks and finance providers offering a range of measures tailored to individual situations. These could include reducing your payments, providing a temporary payment holiday or increasing your credit limit.
“It’s important you reach out to your credit provider as soon as possible, and keep up your current payments until any agreement is in place, as a missed or late payment could affect your credit score. It’s important millennials are familiar with their credit report and score as it will help them protect their financial standing during the pandemic and to understand what finance they are eligible for, if needed.”
According to the research, around one in seven millennials (15%) are considering opening a new credit card to make up for the loss of income, and one in 10 (10%) are planning to take out a new loan.
Tips to help millennials maintain financial stability during the coronavirus pandemic:
- In the short term, keep up to date with ever-changing guidance from the government on what financial support is available dependent on your situation. You’ll also find help is available from many lenders so check in with your bank or credit provider
- For the long term, if you’re considering credit, be sure to explore the various options available and think about the interest over the full term, not just the headline rate. Be careful not to overstretch yourself
- Think carefully about the implications of the different kinds of credit. For example, a secured loan (one that’s protected against a significant asset; such as a house or car) may have a lower interest rate but it’s a big risk that needs to be properly considered
- Check your credit score for free with providers such as Credit Karma, MoneySuperMarket, or TotallyMoney. Being familiar with your credit report and score can help you to understand what products you’re likely to be accepted for and ensure the information held is accurate.