Understanding what a recession is and its implications for your financial well-being is essential.
What is a recession?
A recession exists when a significant drop in economic activity is experienced. Reduced spending, investments, supply chain disruptions, tight monetary policies, fiscal changes, asset bubbles, and external events contribute to recessions. It's a challenging period that affects the overall health and stability of a country's economy.
At Aventa, we understand the challenges of the adjustments you might need to make during a recession. Our commitment as a financial institution is to empower our members with the resources and information they need to navigate these uncertain times effectively.
Overall, career growth, psychological impacts, and living cost impact consumers across all age groups and income levels.
Careers: During a recession, job losses become more likely as businesses downsize or close, which can have a rippling effect across various industries. Unemployment rates rise, creating a challenge for individuals looking to secure new job opportunities. Additionally, economic downturns disrupt career advancement, as companies implement hiring freezes and restrict promotion opportunities and salary increases, impacting professional growth.
Living Costs and Financial Strain: During a recession, everyone feels the pinch of higher living costs and financial stress, regardless of age. Affordable housing becomes challenging, as some even risk losing their homes—many resort to credit cards and loans to make ends meet. Which in turn, leads to more debt. People spend less, affecting businesses and the economy.
Psychological impacts: During a recession, there's a natural trend to experience an added sense of stressed and anxiety because of job worries and money problems. It can also lead to depression and other mental health issues for individuals and families. People may feel unhappy when they fear losing their jobs or having less work. Recognizing and dealing with these feelings is essential to maintaining mental wellness during tough economic times.
Here are additional challenges each age group faces.
18-24: The impact of a recession on young adults aged 18 to 24 is significant and covers various aspects like job opportunities and college education. Economic downturns create hurdles in starting careers and pursuing higher education due to fewer job openings and increased competition. College costs become more challenging, and finding entry-level jobs becomes harder.
25-34: The impact of a recession on individuals aged 25 to 34 is widespread, affecting family dynamics, savings growth, and career prospects. Managing finances becomes harder during economic downturns, and stable employment can be challenging to secure. Planning for the future becomes uncertain, and saving for long-term financial security becomes more difficult.
35-54: As the economy takes a downturn, people aged 35 to 54 face significant challenges that affect their finances and personal lives. The recession hits them hardest in areas like starting businesses, saving money, and achieving important life goals. For those in their prime working years, the uncertainty can disrupt careers and dreams of starting a business, leading to money worries and putting life goals on hold. It's also tough to save for the future and make suitable investments during the economic downturn.
55+: As the economy goes downhill, people aged 55 and above face unique challenges that affect their financial security and well-being. The recession hits them in crucial areas like retirement plans, healthcare, and government assistance. Financial plans and savings can be disrupted for those nearing retirement, causing worries about their financial future. Access to affordable healthcare becomes more critical as job losses or reduced work hours may affect health insurance coverage. Older adults may increasingly rely on government assistance programs to meet their needs.
How do you save during a recession?
Saving during a recession is essential for building financial resilience.
1 Create a Budget
2 Reduce Debt
3 Cut Spending
4 Shop Deals
5 Negotiate Bills
6 Explore Side Income
Remember, even small savings can add up over time and provide a safety net during uncertain economic periods. Being disciplined and strategic with your finances will help you weather the challenges of a recession.