It is a well-known truth that a majority of Millennials (born 1977-1995) struggle with debt. Not including mortgages, the average debt they hold is around $28,000. That money is typically wrapped up in student loans, car loans, and revolving credit card debt.
Generation Z (born 1996-?) has witnessed the distress and life delays the previous generation encountered due to these financial stumbling blocks. As a result, they have vowed not to “end up like Millennials.” They want to work hard, save money, and avoid being trapped due to financial insecurity.
- 77% of Gen Z already earn extra money through freelance work, a part-time job, or an earned allowance
- 1 in 5 say personal debt should be completely avoided
- 35% plan to start saving for retirement in their 20s
- 24% of Gen Z plan to pay for college with their savings and 38% plan to work while in school
- 60% already have savings accounts
Despite the goal to avoid the same financial pitfalls as their predecessors, Generation Z is already holding an average debt of nearly $15,000, according to a study performed by Northwestern Mutual.
Where Are They Now?
Most Millennials are dealing with their financial problems by placing a heavy focus on paying down their current debts. Based on their past experiences, they view personal debt as something to avoid and put a lot of attention on getting their finances back in order.
- Millennials spend 34% of their monthly income on paying off debt
- ¼ do not have a retirement savings account
- 58% have less than $5,000 in savings
- 38% of Millennials do not have a budget. But 35% have a budget they regularly follow.
- 57% consider themselves to be “disciplined” or “highly disciplined” financial planners
Generation Z, on the other hand, is only now beginning to enter adulthood and discover the associated financial pitfalls of breaking out on their own.
- 69% do not have clarity on how much they can afford to spend or how much they should save for the future
- Over ½ have less than $250 in savings
- 40% of Gen Z does not create or use a budget
- 81% stress about money, compared to 64% of all adults
Avoiding the “New Normal”
For most Millennials, it is too late to prevent early debt. But Gen Z can use the same steps Millennials have found are helping them OUT of financial trouble to achieve their goals of financial freedom.
- Determine your overall financial goal. Whether it is to pay off debt, save for retirement, or build an emergency fund, all financial goals require handling your money in a slightly different manner. What is most vital for you to tackle first?
- Get everyone on board. Whether it is your children, your significant other, your parents, or just you, it is essential for everyone who has any say in your financial situation to understand the overall goal and strategy.
- Create a budget and stick to it. The budgeting process creates the clarity you need on what you can spend versus save by detailing expenses and focusing on your personal financial goals. More on creating a budget here.
Early debt may seem like it is quickly becoming the way things are for the future. But you can fight it. Following these steps to get a handle on your finances can help you pay off already acquired debt – or avoid the issue to begin with.