‘If you’re behind, these funds won’t really make a difference’: J. Michael Collins on impact of stimulus package on recovery
J. Michael Collins, from University of Wisconsin’s Center for Financial Security, joins Yahoo Finance’s Kristin Myers to discuss where financial well-being in headed and how young people and women can recover financially from the pandemic.
KRISTIN MYERS: Let's look at personal finance now and where financial health is headed in the new year. For today's Funding Our Future segment, we're joined by Michael Collins from the Center for Financial Security at the University of Wisconsin at Madison. So I want to talk about 2020 first, before we look ahead. It's caused a lot of people to struggle financially throughout this year. What kind of financial health do most folks, most Americans have heading into the new year?
MICHAEL COLLINS: You know, I think when the pandemic began, we worried that people were going to be really set back on both the job loss and just the general effects of the lockdowns and whatnot. You know, because of the measures that we took between the stimulus, and extended unemployment, and whatnot, a lot of people came out better than maybe we thought. So it could have been worse, but there's so much anxiety.
So much worry about how quickly things will come back. People have tried to save up the best they can, but they also are waiting for the other shoe to drop. So I think there's a lot of anxiety. And so you financial well-being is not where we'd like it to be, certainly, and isn't where it was a year ago.
KRISTIN MYERS: So we have a study and some notes that you were able to provide to us before. And it mentions young people and women specifically, women especially lagging behind financially at every single age category. So let's look at women for-- for a moment.
How do we boost women's financial health and security going forward, especially after this year where we saw women really disproportionately impacted as they were hit hardest when it came to unemployment, the fact that they were primary caretakers for their children, which are at home thanks to daycares closing and now having to be teachers as well. So 2021 and beyond, how do we help women of all age groups?
MICHAEL COLLINS: I think, you know, the conditions of women, especially young women, millennial age women, have been lagging behind men and behind older people in general. And you know, a lot of this is just not having the ability to absorb shocks. When you're on the front line of caregiving, when you're in jobs that maybe are the first ones to get cut back, all those things make it really hard to stay on track with your specific goals.
So, you know, obviously, as women have caught up and actually surpassed men in education, they're getting into better and better jobs, but those jobs don't necessarily have the flexibility that they need to be able to keep up with the caregiving and other responsibilities. So it's definitely been an issue over time. And that really, like so many things, the pandemic has just shined a light on the issues, the vulnerabilities that especially millennial women are facing in the economy today.
KRISTIN MYERS: And pivoting now, at least to that specific age group of millennials, which is my age group. When I think about folks in my age cohort, I think that we've had a lot of financial hits essentially throughout the entirety of our adulthood. First, starting adulthood, our working careers anyway, with the recession, and being forced to take lower salaries as a result going forward.
And now we have this, right? We have this pandemic. I'm wondering if you think that millennials are going to be the worst off generation, at least financially, and what could these knock on effects, what is the compound impact of this pandemic, especially after, again, that hit of a recession over a decade ago?
MICHAEL COLLINS: Yeah, I know, there's no question that it has been just a series of difficulties for millennials. I mean, entering the job market sort of behind, and now facing this, you know, are sort of a double-- a decade with-- with these sort of hard hits. And you know, it's been harder and harder for each generation to kind of keep up, and we're seeing that excessively with this generation too.
We did a poll with daily pay, back in the late fall. And we asked millennials, you know, how easy is it for you to maintain your savings? And only 1/2 were able to say that they had been able to maintain their savings. The other 1/2 said they depleted their savings. So millennials are what-- what resources they were able to gather the pandemic has knocked off.
And you know, we asked them about their goals. Only about 46% of men, millennial men, so they were on track with their retirement savings goals and only 25% of women. So I think it has been quite a difficult period of time this last year. And this is going to take a long time to recover from. I think we're looking at two or three years at least for some of these younger people to get back on track.
KRISTIN MYERS: This, of course, brings me at least to stimulus. A lot of folks calling the economic aid package that we've seen too little too late. We now have $600 individual stimulus checks going out. I don't know what that can do in Madison, but here in New York, it doesn't do very much, the $600.
At least, when it comes to just rent alone. So what are your thoughts on-- on this stimulus deal? Do we need to be pushing for that $2,000 individual stimulus checks, and really should the government be considering perhaps sustained economic assistance?
MICHAEL COLLINS: Yeah, I think, you know, the-- one of the things is the uncertainty over all this. So if people had known in advance that this was coming, they could have planned better, but because we, you know, the politicians really dragged their feet for so long, it was really hard for people to know how much they were going to get and when.
And so, as a result, a lot of people are just not spending. They're stocking. We've seen savings balances go up. And so people are kind of, again, worried about the other shoe dropping. And so I suspect a lot of this $600 or $2,000 is just going to go into sort of a savings account that people use and will spend down over time.
The problem is is that for anybody who's lost a job, or is facing, you know, the juggling of a career and caregiving, and all the other things that they're facing that, you know, those funds don't last long. And as you said, that if you're behind, these funds really aren't going to make a difference.
So it's things like the unemployment insurance, the social safety net, those are the programs that are really, really important for people who are facing an emergency, but for everyone else, it's going to be a matter of trying to plug those holes and keep up with what they can. And eventually that savings, where ever it comes from, the stimulus or something else, is going to end up having to be spent down.
KRISTIN MYERS: All right. Michael Collins from the Center for Financial Security at the University of Wisconsin Madison. Thanks for joining us for our Funding Our Future segment.
MICHAEL COLLINS: Thanks for having me. I appreciate it.