Understanding Debt Across the Generational Gap

Generations are not something that is set in stone, but there are some seriously interesting correlations between generational members to investigate. Each generation has a unique attitude towards life and the world around them that can be seen through technological innovation and the job market.

However, the one thing that is common across every generation up until those born within the last few years is debt. Every generation has a unique overall financial position as some are taking on increasing amounts of debt while others are finally paying off their last bills. Let’s take a look into each generation’s debt standings and see why each generation has a unique amount of debt.

Why Does Each Generation Accumulate Different Debt Levels?

A common question that many people have and often wonder about is why is there such a substantial amount of variety of debt that each generation is accumulating. Debt is something consistent throughout generations as everyone reaches a point in life when they need more capital to fund their next steps in life.

It seems that the primary reason there is such a wide range of debt accumulated by generations comes down to age and where certain generations are in life. For example, the average Gen Z person is just now getting to an age where they can access credit cards while Gen X is still working to pay off their home loans they took out years ago. However, it seems that as time goes on and costs of living increase, generations like Millennials and Gen Z will be accumulating more debt as the job market shifts and they need more debt to sustain their living needs.

Debt By The Years

The Silent Generation (1945-Earlier)

The silent generation is currently the oldest generation when looking at debt and they have a unique position. As credit just started to be invented as they were growing up, they were the first generation to become susceptible to debt in the form of credit payments. This most often came in credit card and auto debt.

A little over half of the silent generation still holds on to some level of debt even as they are in their retirement. The silent generation has a comparatively high personal loan debt while also sustaining a lower average personal debt than many of the other generations. Despite their lower living costs for most of their lives, this generation is still looking to take care of debts they have had for years.

The Baby Boomers (1946-1964)

Many younger generations look at baby boomers as the ones who got away with not having to worry about paying off student loans, but they have substantial amounts of debt virtually everywhere else. Baby boomers are quickly approaching the average age of retirement and are still holding on to a substantial amount of debt.

Baby boomers have a large amount of credit card debt that can be compared to that of a Millennial, but they are also wrapped up in a high level of mortgage debt. Baby boomers have the highest personal loan debt among any generation with credit cards, auto, and HELOC debt all compounding as they try to pay off high debt amounts before retirement.

Generation X (1965-1980)

Despite usually being skipped over when discussing debt between the more vocal Millennials and Baby Boomers, Gen X actually has more debt than any other generation. They are spread thin as their debt is tied up in just about every aspect of their lives from mortgages to student loans.

Gen X seem to be the first ones to face the wrath of unjustifiably high student loan costs with student loans making up a substantial amount of their overall debt payments. Gen X has debt coming at them from all angles and it is easily evident when you look at their debt rates that show no sign of decreasing over the coming years.

Millennials (1981-1995)

One of the most researched generations, Millennials are right behind Gen X when it comes to overall debt owed. An interesting correlation in the Millennial debt issue is that the rising student loan costs are leading to a substantial amount of auto loans that need to be taken out as the Millennials don’t have the liquid assets to pay off student loans and buy a car without a loan.

Millennials are also the generation that appears to be the most vocal when it comes to their struggles dealing with debt. A tight job market and an increasingly outsourced labor sector means that Millennials are under more stress than ever before as debt and loans start to take mental tolls on their wellbeing.

Generation Z (1996-2015)

Our youngest generation that is just now being able to take out loans and debt is in for one wild ride ahead. While they have the lowest debt amount at the current moment, financing for homes, cars, and life expenses are going to be piled onto this generation like a ton of bricks. Rising student loan costs and an increase in cost of living means there will likely be a widespread debt issue.

Gen Z is starting to get into the age where loans and credit cards are becoming feasible, so more information will be needed going forward to collect accurate debt information. Thanks to more information and lessons from older generations, Gen Z is also the most well equipped to make smarter financial decisions and could show a promising future for debt relief.

The Big Picture

Debt seems to be a universal part of life in modern times, so being ready to embrace it and take care of it effectively is more important than ever before. Every generation has debt tied up in different areas with older generations dealing with mortgage debts as younger generations start to feel the blow from student loans. New generations are taking on debt with their heads held high in hopes to learn from the past so they can better secure their future and help the next generation thrive.

Sources:

https://howmuch.net/articles/assets-debt-3-generations