Many younger Americans, particularly those in Generation Z, are grappling with mounting debt and financial challenges as the costs of education, housing, and everyday expenses continue to rise. The rising costs of education and housing have had a disproportionate impact on Gen Z, with their monthly debt payments increasing by 74% compared to a 32% increase for Americans as a whole between 2020 and 2023 [d2019a63] [ed61e828]. This financial strain is likely to have long-term consequences for the younger generation and their ability to achieve financial stability. The burden of debt and the challenges of affording basic necessities like housing and education are creating significant obstacles for Gen Z individuals as they navigate their early adult years [d2019a63] [ed61e828].
A recent study from TransUnion, as reported by KAKE [66cee05d], found that Gen Zers in their early 20s are earning less, have more debt, and see higher delinquency rates than Millennials did at their age. This is partly due to the economic challenges faced by both generations early in their careers, with Gen Z dealing with the Covid-19 pandemic and Millennials facing the global financial crisis. The study also highlights the impact of sticky inflation on the current generation of early 20-somethings, driving up prices of goods and services and contributing to higher debt levels and delinquencies in the US credit economy. However, experts advise Gen Zers to establish healthy financial habits and avoid accumulating debt, as they may see salary increases as they progress in their careers [66cee05d] [2394be34].
A recent article from The Washington Post [d9d89ab7] reveals that Generation Z is facing more financial challenges than millennials. They are spending more on housing and insurance, have more debt, and are more likely to be maxed out on their credit cards. Despite higher wages and more jobs, Gen Z is paying 31% more for housing than their counterparts a decade ago, while spending on car insurance and health insurance has also increased. The financial difficulties of Gen Z could explain President Biden's challenges in connecting with younger voters. Gen Z has more debt of all kinds, including credit cards, car loans, and mortgages, compared to millennials. Debt loads have gone up faster than rising incomes for Gen Z. Rising prices are dealing an outsize blow to Gen Z, with housing costs being the biggest burden. Gen Z is expected to spend an average of $145,000 on rent by the time they turn 30. They also have higher student debt balances and are more likely to be unemployed than the general population. Gen Z is facing difficulties in finding work and is struggling to pay off their debt. [d9d89ab7]
According to a report from the Federal Reserve Bank of New York, approximately one in seven (14.3%) Gen Z credit card borrowers have maxed out their credit cards, compared to just 4.8% of Baby Boomer borrowers and 9.6% of Gen Xers. The study also found that credit card delinquencies have surpassed pre-pandemic levels, with severe delinquencies reaching 10.7%, the highest since 2012 [8856aadd] [3b929716]. The research shows a direct link between maxing out credit cards and falling behind on payments. Younger borrowers have lower credit limits, with the median Gen Z borrower having a credit limit of $4,500. Borrowers in low-income areas are also more likely to be maxed out on their credit cards. The average credit card interest rate is currently 20.66%. Experts suggest possible solutions for those in credit card debt, such as transferring debt to balance transfer cards with 0% interest, seeking nonprofit credit counseling, and finding ways to boost income and cut expenses [8856aadd] [3b929716].
A recent analysis of household debt across the United States reveals that Gen Xers have the highest median non-mortgage debt of $33,859, followed by millennials with $30,558. Baby boomers have a lower median non-mortgage debt of $18,779, while Gen Z carries the lowest median non-mortgage debt at $16,562. Regional variations also play a significant role in debt levels, with McAllen, Texas, having high auto loan debts and cities like Boston and New Haven reporting elevated student loan debts. These insights are crucial for policymakers and financial institutions aiming to address the challenges posed by household debt [5b8b7f85].
Generation Z consumers are a growing demographic that financial service providers, including credit unions (CUs), need to watch. They are primarily digital-first consumers who manage and spend their money via digital channels. However, Gen Z consumers can be fickle, with 4 in 10 Gen Z CU members saying they switched financial institutions (FIs) in the past year. Lack of innovation drives Gen Z away, as they are 2.5 times more likely than baby boomers and seniors to leave FIs that don't innovate. CUs must align their innovation agendas with Gen Z's needs and expectations. Top-performing CUs currently offer 40% more products and capabilities than bottom performers. One-quarter of Gen Z members want peer-to-peer (P2P) payment innovations and features that help them manage their finances. Many CUs have no immediate plans to pivot their innovation plans to meet Gen Z's preferences, with 41% having no plans to offer Zelle by 2030 and 85% having no plans to offer young adult and teen debit cards by 2030. CUs that best meet Gen Z's needs can reduce member churn and attract new members in the future [de028e82].
A study by LendingTree revealed that citizens belonging to Generation X (44 - 59 years old) have the highest average debt of all age groups analyzed, with an average of more than $33,800 in non-mortgage debt. This is almost $10,000 more than the national average. Millennials follow with more than $30,500 in non-mortgage debt. The study also found that credit card debt is high across all generations, ranging from 80.8% of Gen Zers to 93.1% of baby boomers. Additionally, Gen Xers have the highest balance of student debt, with a median balance of $31,066 compared to $24,112 for millennials. [483fe2ce]
The total U.S. consumer debt balance rose to $17.1 trillion in 2023 from $16.38 trillion in 2022. Higher consumer debt extends to all parts of the country and all generations as well. According to Experian, the average consumer debt balances for each generation in 2023 are: Generation Z - $29,820, Millennials - $125,047, Generation X - $157,556, Baby boomers - $94,880, Silent Generation - $38,600. The 10 states with the most consumer debt are: Alaska, Hawaii, California, Nevada, Colorado, Washington, Oregon, New Hampshire, Vermont, and Massachusetts. The five states with the lowest average consumer debt are: West Virginia, Mississippi, Arkansas, Oklahoma, and Ohio. [8de6156d]