Generation Z Struggles with Economic Burdens and Record Debt: A Closer Look

As the economy continues to evolve, a new generation, Generation Z, is facing significant financial challenges. This cohort, generally defined as individuals between the ages of 12 and 27, has been particularly impacted by rising prices, surging housing costs, growing student loan balances, and an overall increase in debt compared to the millennial generation.

Disproportionate Economic Burden

When comparing the financial experiences of Generation Z and millennials, data from the Bureau of Labor Statistics reveals that Generation Z is spending more on essentials, such as housing, compared to what millennials spent at the same age. This financial strain on Generation Z may also be influencing their political preferences, with President Biden facing challenges in garnering support from younger voters, who often cite inflation as their top concern.

Debt and Financial Hardships

According to TransUnion's internal records, Generation Z carries a heavier burden of debt, including credit card debt, car loans, and mortgages, compared to millennials at the same age. The debt load for Generation Z has increased at a faster rate than their income, making debt equivalent to about 16% of their income at the end of last year, a higher percentage compared to the 12% that millennials faced a decade earlier.

Many individuals within Generation Z, such as 21-year-old Sarah Martin from Pittsburgh, have found themselves accumulating credit card debt due to various expenses, including impulse purchases and unexpected healthcare costs. Martin's experience reflects a larger trend, with approximately 1 in 7 Gen Zers being maxed out on their credit cards, surpassing other generations. The average credit card interest rates have also surged, nearing an all-time high of 22%, making it challenging for young adults to manage their debt effectively.

Challenges and Economic Impact

Economists emphasize the significance of timing, pointing out that the pandemic forced many within Generation Z to remain at home during crucial high school and college years, leading to missed social and professional opportunities. As the world began to reopen in 2021, many individuals were eager to make up for lost time, resulting in increased spending and a higher reliance on credit.

However, despite a swift and broad recovery in the economy since the pandemic, rising prices are disproportionately affecting Generation Z. With an increased focus on basic necessities such as housing, dining out, gas, and car insurance, young adults under 27 are bearing the brunt of inflated costs, with housing expenses presenting the most significant challenge.

Student Loan Debt and Unemployment

In addition to credit card debt and housing costs, Generation Z is also contending with higher student loan balances compared to previous generations. Recent college graduates are facing difficulties in finding employment, creating a sense of uncertainty among individuals like Spencer Kammerman, who graduated with a degree in computer science and engineering but has struggled with job security and layoffs.