By Chee Jo-Ey
MANY young professionals who have just started coming into the job market are facing their first economic crisis caused by the Covid-19 pandemic.
Given that they are still finding their footing in the working world, they might be facing financial pressures including limited cash flow that might lead them to neglect long-term financial plans.
According to Sunway University Business School professor of economics Dr Yeah Kim Leng, the effects from the financial crisis in 2008 were not as prominently felt as the crisis recovered quite quickly. This time round, there will be greater stagnation in the job market.
“Being fresh in the job market, the new generation most probably will not be able to save much. They need to focus on enhancing their future earnings by continuously raising their skill level and equip themselves with skills that match the changing economic landscape which is a shift towards the digital world,” said Yeah.
The Gen Z, which comprises people born from 1995 to 2010, is characterised by digitalisation. Technology is second nature to them so they could leverage their skills and adaptability to their advantage.
This pandemic presents a tough situation to young workers but also provides an opportunity for them to explore alternative avenues of income, be it starting a side venture, exploring a different career path or even finding investments that provide high returns. This economic crisis will push them to find ways to supplement their income like getting a part-time job in the gig sector.
Although the millennials or Gen Y and Gen Z might be facing tight financial situations due to the Covid-19 crisis, they still need to focus on long-term plans.
“They can take advantage of their long time horizon and seek out different ways to increase their income including learning new skills. The Gen Y and Gen Z experience a faster pace of career development compared to previous generations, so the younger generation is agile and used to change, albeit having less savings to depend on,” added Yeah.
If they neglect budgeting and saving, they will become vulnerable to economic shocks including downturns and unemployment. Their vulnerability will increase along with their debts.
Capspring Temasik financial adviser Wong Lee Kheng said: “Although we’re in a global crisis right now, it is important we try to maintain our financial goal from the perspective of financial planning. The fundamentals like having enough insurance coverage, emergency fund, and investment strategies should not change much. The only thing affected is our source of income and we need to find ways to adapt and make up for it.”
The younger generation needs to make sacrifices for the long term, and as long as long they trim down their expenses to just the essentials, they will be able to tide things over and not need to forgo their retirement savings.
“There should not be a drastic change to our financial plans and goals, otherwise there is no point in making them. But with more experiences, people will have a clearer idea of what they want and really need in the future.
“It is the survival of the fittest now and young workers should diversify their ways of earning and really dial it down with their spending.
“We were not affected much by the 2008 crisis but the coronavirus pandemic is global and this time, the new generation will truly feel the impact and they must learn from this crisis and take such situations into account when calculating risks and setting up emergency funds,” said Wong. – May 14, 2020