A growing mountain of personal debt is stymieing the attempts of the youngest adults, Generation Z, to strike out on their own financially.
Gen Z young adults in their early to mid-20s are struggling to make ends meet due to record inflation and persistently low salaries, according to The Wall Street Journal. Many of these young adults have recently joined the labor force or are attempting to do so. Most people classify those who came of age between 1997 and 2012 as members of Generation Z.
A lot of people use their credit cards to pay for necessities like rent and groceries.
In the fourth quarter of 2023, the average credit card amount for young adults 22 to 24 years old was $2,834, according to TransUnion, a credit-reporting bureau. After adjusting for inflation, this group’s average balance in 2013 was a meager $2,248.
Rent is the primary cause of the rising debt among young people. Nowadays, renting is more cost-effective than buying a home.
According to November research by The Economist, 89% of Americans are finding it cheaper to rent a two-bedroom apartment than to buy one due to rising housing costs and mortgage rates.
Rent, an online rental marketplace targeting young adults, reported a median U.S. rent of $1,987 in March, a 22% increase over the previous four years.
The pay growth rate, meanwhile, is far lower.
The typical yearly salary for recent college graduates was $60,000 last year, which is slightly more than $58,858 in 2020, according to data from the Federal Reserve of New York.
Credit card issuers, meanwhile, loosened their requirements for new customers during the outbreak. In turn, this encouraged more members of Generation Z to create bank accounts; in fact, TransUnion data shows that this demographic is more likely to own a credit card than millennials were a decade ago.
Generation Z’s credit ratings, like many others, increased during the epidemic as stimulus checks arrived in bank accounts and many businesses were temporarily closed. But since the epidemic, millennials and Generation Z have seen their credit ratings plummet because of higher interest rates.
Among today’s young adults, student loans are a major source of debt. Borrowers on the political left often want the government to pay to cancel their loans. Meanwhile, detractors point fingers at alums for accruing excessive debt at the tender age of eighteen, despite the fact that many of these students’ parents had reassured them that it was a wise investment and had failed to foresee the recent spike in inflation.
Young people are putting off marriage, children, and property until they are financially stable enough to support themselves and any dependents they may have.
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