It’s not news that as of late income levels have not been enough to cover the rising costs of living. This has prevented individuals and families from savings, investing, and building wealth overall. Even worse, it has led to an increase in total non-mortgage debt among younger creditors, especially those in their 20s and 30s.
Credit card reporting company, Experian, published a report in 2020 describing the average non-mortgage debt belonging to Gen Z and Millennial consumers. The average debts were $10,942 and $27,251 respectively. These debts can include credit card debt, auto loans, student loans, etc. When also including mortgage debt, these figures skyrocket, especially between ages 23 and 39 when major milestones and life changes are occurring. These can include starting a family, vacationing, purchasing a home, and more. Even though these are trends for some young creditors, it is important to note that increasing debt has also prevented these demographics from reaching certain milestones. Young adults with student loans have been less likely to have children or be married. Although some Millennials are becoming homeowners, many are underwater on their mortgages.
Some have blamed this surge on younger creditors’ need to pay for higher education, especially since the cost of tuition has been on the rise in recent years. Pair that with the rising cost of living and decades of slow income growth, and the result is young creditors relying on using credit cards to cover their expenses. The main issue experts are seeing is that these groups are not only taking on more debt with more intensity than previous generations, but they are acquiring it earlier and holding on to it for longer.
How to Prevent Rising Debt in Younger Creditors
Many experts are calling for more education in personal finance for young people. Teaching things like the dangers of taking on too much debt, bankruptcy, or how to understand credit card agreements could potentially reduce the amount of debt young people take on. Studies have shown that Millennials who received financial advice from a parent or trusted adult reported fewer financial burdens than those who either received no advice or received advice from uncredible sources.
What’s Next for Younger Creditors?
On the bright side, these generations are at least showing signs of having good credit habits, including paying their monthly payments on time and monitoring their credit. Still, if the burden of debt becomes too overwhelming, it may be more beneficial to seek help from professionals. If you need help with debt, give us a call at 800-470-8155 for a free consultation.