Build your financial resilience
In the face of unprecedented health and economic disruption caused by the Covid-19 pandemic, millennials are showing resilience and resolve to build a better future.This is according to the latest Global Millennial Survey by Deloitte. This year's survey explored the views of more than 27,000 millennials (people aged 26 to 40) and Gen Zs (those born since 1995), before and after the start of the pandemic."They've seen how quickly the Earth can heal, how rapidly business can adapt, and how resourceful and co-operative people can be," says the survey. "They know that a post-pandemic society can be better than the one that preceded it, and they're tenacious enough to make it a reality."Millennials are the largest generation in the world and in SA they make up 27% of the population - 14-million people. Of all generations, they are said to have been the hardest hit, financially, by the pandemic. According to TransUnion, 84% of South African millennials say their household incomes have been negatively affected (compared to 79% of people in other generations), while 34% of them have had their work hours reduced and 11% have lost their jobs.This pressure is compounded by the fact that 66% of South African millennials have dependent children living at home, compared to 48% for other generations, says TransUnion.Almost half of millennials say they are unable to pay their home loan or rent, compared to 43% for other generations.Andiswa Gqwaru, the head of client success at Momentum, says the personal finances of many millennials can be likened to a collapsed building. Buildings collapse for many reasons, including a weak foundation and having to carry a load that's heavier than expected.To withstand a crisis, your financial foundation must be based on strong savings, an emergency fund, assets that are protected, and no bad debt, Gqwaru says. It's crucial to save at least 20% of gross income, she says. If you're a permanent employee, about 15% is already saved on your behalf for your retirement, leaving you responsible for saving 5% for other goals. But if you're a contract worker or self-employed, you must save for your retirement yourself. Gqwaru refers to emergency savings as a "peace-of-mind fund" that you can dip into - not only in dire times such as these, but also "when life happens". Ideally, you want to have three months of expenses in this fund, which must be easily accessible. Thirdly, you need to protect your assets. If you don't have the cash to replace the things you own, you need to insure them, she says. Lastly, she says, you must not have any bad debt. Many millennials can't repay their personal loans or credit cards, which suggests they couldn't afford the credit to begin with. Your finances can also collapse if your are spending too much in one area while neglecting others. To give you a rough idea of how to divvy up your budget, spend no more than 65% on your needs, 15% on wants and at least 20% on savings, she says. When you have a crisis, you should be able to cover your basic needs by suspending spending on wants and savings.Gqwaru says another reason buildings collapse is because people make mistakes. The money mistakes you should avoid at this time include accumulating debt when you should be tackling it while interest rates are low.Avoid cancelling insurance. Rather renegotiate your cover, she says. Beware of pyramid schemes. Incomes are vulnerable, and so are people. Be alert and analyse "opportunities" to make sure you invest in the right instruments, she says.Lastly, beware of doing nothing. "When you're under pressure, don't ignore your problems. They will only get worse."