How much debt each generation has in the United States

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From student and auto loans to credit card debt, the average American owes money in one way or another.

In 2020, the stock of consumer debt in the United States reached $ 14.88 trillion, according to data from an Experian study on consumer debt, who analyzed credit report information for a statistically relevant sample from its database.

This represents an increase of over $ 3 trillion from the total of $ 11.32 trillion in 2010, and represents an average individual debt of $ 92,727. However, the debt burden is not distributed evenly across generations or individuals.

Here’s a look at the average amount of debt for each generation, including credit card debt, student loans, personal debt, and auto loans. Mortgage debt is excluded from these totals.

Generation Z – Average debt: $ 16,043

Gen Z, aged 18 to 23, have an average debt of $ 16,043. One-eighth of that amount is credit card debt, with each person having an average balance of $ 1,963.

For young people, this is the most dangerous type of debt, says Greg McBride, chartered accountant and chief financial analyst at Bankrate. “Not only do you want to pay this off as quickly as possible, but you want to prevent this from continuing,” McBride told CNBC Make It. “Credit card debt tends to be the highest interest rate debt that people carry.”

It’s also important for people who get their first credit cards to understand that credit card companies want their customers to keep a balance in order to charge them interest rates of up to 25%, according to the company. Shari Grego Reiches, wealth manager and expert in behavioral finance. Customers should make every effort not to spend more than they can fully reimburse.

“Credit card [companies] are very effective in facilitating the payment of the minimum payment, ”she said. But “it’s a very slippery slope. Before you know it, it’s a never-ending battle to pay it off. “

Millennials – Average debt: $ 87,448

Millennials, the oldest among them turned 40 this year, have significantly higher average debt than their younger counterparts. Millennials owe an average of $ 87,448, with an average student loan balance of just under $ 39,000. Additionally, Millennials also hold an average mortgage balance of $ 237,349.

With many of this generation becoming both parents and homeowners for the first time, Grego Reiches says millennials have the least leeway “when it comes to financial planning and debt.”

“When you buy that first home, you really have to be careful that you can pay off your mortgage even with the child care expenses,” she says. “If you buy a house when you’re 30 or 32 and you [plan to] have your first child at 34, make sure you take all of that into account. “

Generation X – Average debt: $ 140,643

With ages ranging from 41 to 56, Gen X has a wide range of life experiences, as well as the highest average debt of any generation.

Many Gen Xers are sending their children to college for the first time, while still maintaining an average student loan balance of just over $ 45,000. But they should remember to focus on their own debts before their children, ”says McBride.

“You have to avoid getting into more debt to finance your children’s studies,” he says. “Your kids can get financial help for their education. You can’t get financial help for retirement.”

Baby Boomers – Average Debt: $ 97,290

With their oldest members aged 75, baby boomers have considerably less debt than the generation below them at an average of $ 97,290 each. This includes a personal loan balance of $ 19,700 on average and credit card debt of $ 6,043 on average.

Baby boomers also owe an average of $ 178,688 on their mortgages. But while retirement is fast approaching, they should continue to focus on saving rather than paying off their home.

“The incentive to pay off that mortgage before retirement is not the same as in 1981, when the interest rate was 16%,” says McBride. “Especially in relation to what your retirement nest egg could earn.”

How to deal with your debt

If you’re serious about paying off your debts, the most important thing to do first is get them all in one place, says McBride.

“Make a list of all the people you owe, what is the monthly payment, what is the current balance and what is the interest rate,” says McBride. He likens paying off a large amount of debt to a trip across the country: it makes sense to “chart the best route to get there.”

“You’re not going to just get in the car and meander aimlessly and expect to get there efficiently,” he says.

For most people, McBride recommends prioritizing high-cost debt like credit cards and other installment loans, as they tend to have the highest interest rates. This is called the “avalanche method “and saves money in the long run because it reduces the total amount you pay in interest.

But everyone is different and there is no one-size-fits-all strategy. In some cases, the “snowball method” is the best way to go. This strategy allows people to start with their smallest debt and work your way up to their highest debt. In 2016, researchers for the Harvard Business Review found that the snowball method turned out to be the most effective strategy due to its motivating qualities.

“For some people, it makes more sense to have the reinforcement of the repayment of certain debts,” said McBride. “It might put some wind in your sails and keep you focused.”

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