earn less, have more debt

by times news cr

2024-08-02 18:19:51

One challenge after another

The findings describe the use of credit by members of Generation Z aged 22-24. Millennials were asked about their credit use during that time.

It is reminded that representatives of the Z generation are considered to be 1995-2012. those born between 1980 and 1994, and the Millennials. born persons.

Gen Z, like Millennials, faced economic adversity early in their careers. For Generation Z it was the Covid-19 pandemic, for Millennials it was the global financial crisis.

But the current generation of 20-somethings faces another challenge: inflation, which makes everything from gas at the gas station to food at the grocery store more expensive.

Interest rates, which hit 23-year highs, also pushed up interest rates on auto, student and mortgage loans.

This problem is not entirely unique to early career seekers. Across the U.S. credit economy, debt levels have increased and delinquency levels have increased across most credit products. The report found that in 2023 Americans’ total credit card balances will top $1 trillion for the first time.

But since Gen Zers are just beginning their credit journey, it’s important for them to develop healthy habits now that will help them in the future, experts say.

Before the Bell spoke with Charlie Wise, Global Head of Research and Consulting at TransUnion, to discuss the financial situation of Gen Zers and what they can do to improve it.

“If you think about prices and the cost of living, a lot of what we’ve seen go up are things that Gen Z is likely to spend a large percentage of their income on.

Rent is a huge part, and we’ve seen double digit rental growth over the past few years. But even things like food, dinner, gas, car and transportation costs. All of these things have increased significantly,” he said, commenting on why Generation Z is more likely to use credit than their Millennial peers were 10 years ago.

There is also a lot of tension due to the fact that most Gen Z consumers are not homeowners, they rent or live with family or friends.

Any advice for this generation?

“One of the things that consumers need to understand is that not everyone has the ability to pay off their credit cards in full every month. However, a cycle where you continue to spend on credit cards and only pay the minimum amounts will create opportunities for further debt accumulation.

And paying off credit card balances just by paying the minimum amounts each month will take a lot of time, especially if you keep using those cards,” the interviewer emphasized.

Could it be said that the financial health of Gen Z is a cause for concern, but the situation is more of a wait than a crisis? According to C.Wise, this assessment is very correct.

“Again, we see that the average credit card balance per consumer, even adjusted for inflation, is 26 percent. higher than Millennials a decade ago. So, this is a consumer who is increasingly inclined to borrow. However, even with the higher number of delinquents, we do not think this is necessarily a cause for concern.

Of course, Gen Z consumers may be at a stage in their careers where their salaries can increase quite rapidly as they leave their first job, get promoted or take on a different position in their organization, or look for new jobs where they can earn more.

But at the same time … make sure you’re borrowing and spending within your means,” he explained.

Prepared according to information from CNN.

2024-08-02 18:19:51

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