A Peek Into American Debt By Generation
Generations are largely a social construct. The boundaries that separate a generation can be vague, and for the average person, they might seem to only serve to incite feuding between age groups.
But from a statistical perspective, breaking the population down into generations can be useful. It can help to illuminate larger trends, showing how people experience the world differently depending on when they grew up. This is especially true when looking at debt.
Each generation has different financial challenges, opportunities and priorities. Read ahead for a breakdown of the types and amounts of debt these groups face and how it affects their lives. Age groupings below are based on research from the Center for Generational Kinetics.
Millennials (born 1977–1995)
The data around student loan debt and millennials is widespread, as educational debt affects 35% of millennials — more than any other generation.
But that’s not the only debt they have. Millennials each own 2.4 credit cards on average and 47% of them have an outstanding balance on those cards.
Research from Gallup also shows that “U.S. adults who carry student loan debt are significantly more likely to also have an auto loan (47%) than those with no student loan debt (29%).” This could be a result of not being able to purchase a car in cash due to other financial obligations.
Millennial certified financial planner Eric Roberge said debt affects millennials both financially and emotionally, creating stress, anxiety and even depression.
“It doesn’t feel good to be in debt and sometimes it feels like you’ll never get out from under it,” he said.
Gen X (born 1965–1976)
Gen X has the most debt of any generation, with 72% holding some kind of consumer debt.
In fact, it’s Gen X, not millennials, who hold the largest average student loan balances at over $30,000 outstanding. This could be because many people wait until their 30s to go back to grad school or because they stretch out repayment terms beyond the original 10-year deadline.
This demographic has an average of 4.5 credit cards each, so it’s not surprising that credit card debt also impacts Gen X the most at 61%.
Gen Xers also tend to have bigger mortgages than Baby Boomers did at their age, partly because they were buying homes right before the housing bubble burst.
“The typical Gen Xer in his or her mid-30s had more than twice the mortgage debt that boomers had at the same age,” said a report from the Pew Charitable Trust.
Baby Boomers (born 1946–1964)
As the Baby Boomers start to retire, they’re doing so with more and more debt. Pew research shows 80% of retirees “hold some form of debt,” about half of which is in their mortgage.
While Baby Boomers have almost as much credit card debt as millennials (48% compared to 47%, respectively), their student loan debt is almost nonexistent at 6%. However, they have the second highest number of auto loans next to Gen X.
Financial advisor Roger Whitney of The Retirement Answer Man helps Baby Boomers create retirement plans and says that debt is “very troublesome” for this group.
“As they near or enter retirement, it really puts a limit on the flexibility they have to create a great life,” he said.
Silent Generation or Traditionalists (born 1945 and earlier)
While many from the Silent Generation worked in an era where pensions were common and jobs were stable, they’re not immune to financial trouble.
Credit card debt is the biggest problem for the Silent Generation. Almost a third of them owe money on credit cards, with auto loan debt being the second most common form.
About 56% of them carry debt in retirement, which hurts their financial security. Living on a fixed income and paying off debt is difficult at any age, especially for the elderly.
With credit card debt, student loan debt and home and auto loans, Americans across multiple generations are juggling monetary obligations and trying to improve their finances.
How do you stack up against the data? Does it seem to correlate with your own situation? Let us know in the comments below!
