How to Survive a Recession: What Millennials and Gen Z Can Teach Other Generations

Intergenerational tension is nothing new. And there’s been plenty of tension between baby boomers and millennials—as anyone who’s been on the sending or receiving end of an eyeroll and “OK, boomer” remark can attest. But remember: those boomers were once hippies who rejected the status quo they inherited from their parents.

Besides, it turns out there’s plenty that each can learn from the other about how to survive a recession. From younger folks adopting a more long-term outlook, to older people embracing technology, the coronavirus-sparked economic downturn can provide a catalyst for an intergenerational meeting of the minds.

Whatever generation you belong to, surviving economic hardship takes patience and a willingness to embrace change.

New Tech and Education Aren’t Just for Young People

Although millennials and their younger Gen Z (“zoomer”) counterparts might not have a reputation as financial experts—yet, anyway—their embrace of technology stands to benefit them in a time of increased social distancing that has left some older folks scrambling to figure out how to join a Zoom Video (ZM) meeting.

That embrace of technology goes hand in hand with a willingness to learn that doesn’t have to stop as people get older, according to Alex Coffey, senior specialist, client and market structure insights at TD Ameritrade.

Although younger folks may be more likely to take advantage of a YouTube tutorial or online class, an increase in home-based activities because of the coronavirus is providing an opportunity for older people too, as anyone looking for mental stimulus increasingly has to turn to the internet for entertainment, social interaction, work, and education.

“Free time at home during the coronavirus pandemic can be an opportunity to focus on education, including investor learning, Coffey said, pointing to education offerings freely available to TD Ameritrade clients

Millennials Are Affecting Investing

Use of technology among younger folks is an example of how a generational trait can lead to trading and investing opportunities for everyone.

With more of the economy driven by technology-related firms now than in past years, tech companies may be the leaders in helping the economy recover from the coronavirus downturn. They have already been leading the stock market recovery.

As of May 19, 2020, the Information Technology Sector (IXT) was by far the best-performing of the 11 S&P 500 sectors, rising nearly 27% while the broader index was up just a bit over 2%. Younger generations have not only been quick to embrace technology, but as investors, they have also been buyers of tech shares.

Several studies have shown that tech names such as Apple (AAPL) and Microsoft (MSFT) are also among the top choices for millennials’ portfolios. Data from the Investor Movement Index® (IMX^SM), a proprietary, behavior-based index from TD Ameritrade that aggregates Main Street investor positions, bolster that point, with AAPL and MSFT frequently topping the “net buys among millennials” category.

For what it’s worth, the April 2020 IMX also showed millennials buying shares of the beaten-down travel industry, particularly airlines and cruise lines—perhaps an indication that the generation not only has an eye out for long-term value plays, but also has set its sights toward resuming “normal life” quickly once the pandemic has passed. 

Patience Is Key

But the outperformance of tech-related stocks and the wider market’s recovery is a forward-looking concern. On Main Street things are still looking pretty grim, leaving many wondering how to survive a recession.

A lesson from older generations that millennials and zoomers might embrace is a patient outlook, Coffey pointed out. Youth tends to be associated with a desire for instant gratification, but in a time of economic uncertainty, it’s probably more prudent to be cautious financially, which might mean saving more.

Fortunately, millennial savings do appear to be improving. A Bank of America report based on a September 2019 survey found that nearly one in four millennials who were saving had at least $100,000, up from the 16% revealed in a 2017 survey. It also found that 73% of millennials are saving for life milestones and future goals, with 51% building an emergency fund.

Those who have been building an emergency fund may be thankful for that money now, as many people have lost their jobs and the gig economy might not be enough of a safety net.

Another aspect of patience is a willingness to ride out market volatility and not sell out if stocks fall, locking in losses, Coffey noted. Historically, the market has more than come back from downturns. In fact, market downturns can present buying opportunities.

Of course, riding out a downturn might be easier for younger people who have a ways to go until retirement. Older folks nearing retirement can find it more difficult.

Sacrifice Isn’t Just for the Greatest Generation

Millennial finance can be about making hard choices that balance the need to save, the desire to invest, and the obligation to pay off debt. The Bank of America report found that 76% of millennials carry debt, with 16% owing $50,000 or more, excluding home loans.

“Finding ways to juggle these competing factors during a recession can be especially difficult,” Coffey said. Of course, in times of financial difficulty, making ends meet is the priority. “But once people are on solid footing there, they can save and also invest.”

For millennial spending habits—and investing—a little can go a long way. Any little bit that can be set aside and perhaps invested at a favorable price can turn into a much larger amount in 20 to 30 years. Again, patience is key.

At the same time, Coffey recommended not overextending yourself just because you see what could be a good buy in the stock market.

Fortunately, according to the Bank of America report, 90% of millennials are willing to make sacrifices to achieve a financial goal, including decreasing dining out and cutting out vacations.

Of course, the pandemic has helped curtail those expenses. But as the economy reopens—albeit at lower levels—a willingness to voluntarily cut back could be a boon to the savings of millennials and zoomers, as well as other generations.