With so many feeling financially squeezed, living in debt has become common. As inflation is looming, consumer confidence continues to remain low, and debt grows, with increases in all 50 states by at least 5% on average. A look at the average debt by generation revealed that Gen Z has seen a nearly 30% jump in average debt balance, the highest of all groups. According to the Federal Reserve, household debt in American hit a record in the spring of 2021 at $14.6 trillion. That's an increase of over 6% and the highest annual growth jump in over a decade. In a 2021 CNBC report it says the average American has $90,460 in debt, which included all types of debt products.
It fairs worse to the North, where a recent study revealed in Canada the household debt represents 186.2% of disposable income. This means that there is $1.86 in credit market debt for each and every dollar of household disposable income. About 40% have a mortgage, 29% carry balances on credit cards, 28% have car loans or leases, 20% have lines of credit, 11% have student loans, and about 3% have personal loans. This looks to inevitably lead to future issues and a surprise since many Canadians scored well on financial literacy.
There are several types of debt, from mortgage and auto loans to credit cards, personal loans and more, with home equity loans declining to the surprise of some. Consumers have explored more options from banks and online lenders while mostly maintaining credit scores. As inflation takes its toll its credit card debt that looks to be an ever increasing concern.
The pandemic has undoubtedly had an impact, creating unemployment and reduced incomes. While stimulus checks helped many keep their heads above water, household debt has grown. Debt is a ubiquitous (and often necessary) type of financing for many households. Often it is properly managed by most, and credit score ratios are indicative of this. But recent events through everything off balance, creating financial turmoil just about everywhere.