Could Generation Z be on the verge of repeating the millennial financial woes of the Great Recession?
Now that the holiday bills are rolling in, many people are trembling with fear at the thought of huge bills eating into their bank account. The pandemic has become a stark reminder of how fleeting financial security can be, especially for the younger generation. In this coming-of-age story, we look at how the pandemic has rocked both Millennials and Gen Z.
Pandemic increases credit card debt
While a new study shows that credit card debt has not reached the record high that experts in the US initially predicted, that hasn’t stopped most consumers from turning to credit cards. With over 50 million Americans out of work due to government-mandated shutdowns, it’s no surprise that Millennials and Generation Z have been hardest hit.
A nationwide survey of 1,000 Americans by Debt.com and the Florida Atlantic University Business and Economics Survey Initiative (FAU BEPI) shows that 55% of Americans under the age of 39 charge large credit bills as a result of lost income. Millennials reported that 64.5% of their households lost all or part of their income, while Generation Z reported that 81% lost income.
The lasting impact of the pandemic
70% of Gen Z respondents said the pandemic caused them to take on more credit card debt, compared to 46% of millennials. On top of that, 18-24 year olds are 45% more likely to be in debt month after month. For comparison, in other age groups, the share of monthly credit card debt was just over 30%.
Nearly one in three (30%) respondents said they were forced to temporarily stop credit card payments during the pandemic. And younger people have experienced higher rates of income loss. To be more specific, nearly 6 in 10 Gen Z respondents had to stop paying on their cards, compared to 4 in 10 Millennials. This is a bit worrying given that 39% of Americans carry at least some debt (between $1 and $7,500), while almost 2 in 10 (19%) of Americans have between $8,000 and $25,000 and 9% carry between $30,000. up to $50,000 from month to month. month.
This will definitely have a long-term impact on the lives of young Americans, especially Generation Z. If people temporarily put their credit card payments on hold, they are definitely not saving up for emergencies, let alone retirement. As such, they will likely also have to postpone their retirement due to the lingering effects of the pandemic.
Need help excavating
If you feel like your debt and interest rates are out of control, try calling your creditors to revise your interest rates. If you’ve been able to keep up with your payments and haven’t missed one in the past twelve months, your creditors may be willing to lower your rates.
Then take the time to understand how to use the avalanche method. This is when you pay off your card with the highest percentage first. But keep in mind that if you’re on a tight budget, this method may not be right for you. You can also look at the snowball method to pay off your debts.
The debt snowball method is a strategy where you pay off your debt in order from smallest to largest, gaining momentum as each remaining balance is paid off. When the smallest debt is paid in full, you roll over the minimum payment you made on that debt to the next smallest debt payment. If you’re having trouble knowing where to start, check out Debt.com for help.
Other Wealth of Geeks articles:
What you need to know about debt consolidation
Smart Steps to Take Now for a Brighter Financial Future
This article was prepared by Wealth of Geeks.
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