New Research Shows Alarming Increase in Generation Z Debt During Pandemic

Gillian Sisley

With close to a 70% debt increase in just one year, experts are sounding the alarm for Gen Zers to change their spending habits before it’s too late.

Outstanding consumer debt in the US is currently close to 15 trillion dollars. This evens out to about $93,000 of individual debt per person, and a majority of this debt is carried by older generations.

That said, new research from Experion’s consumer debt study is showing that younger generations are accumulating debt at an alarming rate, and not long from now will easily surpass the debt of older generations if their financial habits don’t change.

This research is especially keeping a close eye on Gen Zers, which includes individuals who are 18 to 23 years old.

What do the numbers currently look like?

The average Gen Zer carries a debt of $16,043. Keep in mind, that this number is particularly interesting as a majority of this generation has not yet graduated with their full student debt potential, or have not started post-secondary education yet.

The breakdown of Gen Z debt is as follows:

  • Average credit card debt: $1,963
  • Average student loan debt: $17,338
  • Average auto loan debt: $15,574
  • Average personal loan debt: $6,004

Generation Z is being kept under a particular microscope because they had the largest debt increase of any generation from 2019-2020. In fact, the report found a 67.2% increase of Gen Z debt between 2019–2020.

Yes, that is indeed an alarming increase percentage to overall debt in just 12 months.

It’s particularly shocking when statistically considering that a majority of the Gen Z generation would have still been living at home during this time, even if they were in college. They would have been remote studying due to the pandemic, likely from their parent's home where a majority of the bills were already covered.

Experion, the company that conducted this research study, saw an overall trend of the youngest consumer market accumulating the largest amount of debt increase between 2019 and 2020.

As a comparison, the millennial generation, which falls between the ages of 25 to 40, was next with the largest accumulation of debt during that year. The millennial debt increase was only 11.5%.

The debt difference between 67.2% and 11.5%, in generations that are directly side by side, is truly startling.

So, where did this money go?

The report didn’t touch on the theory behind this, but in general, it’s safe to say that financial literacy improves with age and maturity.

What we’re seeing with Generation Z in relation to the pandemic is that so many social opportunities were stripped away, and for that reason, extra funds were applied to online shopping, at-home entertainment, and really anything that could take their minds off of what was happening in the world.

I wouldn’t be at all surprised if future research surfaced that showed how during the pandemic Generation Z developed an addiction of sorts for online shopping, especially as they were spending an increased amount of time on social media during the pandemic and unable to see their friends.

With less of a financial hit or worry for financial security, it looks like Gen Z saw the pandemic as an opportunity to spoil themselves by wracking up personal loan debt, auto loan debt, and credit card debt, on top of the already existing student loan debt they may have already been accumulating.

It’s not too late for Gen Zers to turn things around.

Because this generation is still so young, they have plenty of time to reverse this debt — they just have to be committed to actually tackling it.

If the COVID-19 pandemic taught us anything, it’s that financial security can be swiped out from under you at any given time without any notice.

The pandemic certainly should have changed our perceptions of having a safety fund and putting money away for a rainy day. When it hit, it shut down economies all over the world and threw many people into financial ruin. This is a lesson that Generation Z also needs to apply moving forward as they graduate from college and/or enter the workforce. 

As all financial experts say, the first step to tackling debt is ensuring that you’re outflow of income is not higher than your inflow of income. 

Secondly, it’s most important to tackle the debt with the highest interest rate, because in the long run that will save a person money. This is known as the ‘avalanche’ method, and often means tackling credit card debt first, and once that’s paid off allocating all of that to the next-highest interest on one’s debt.

We’ll have to see how significant the impact of the spending habits and debt increase data have on the overall debt of Gen Z moving forward.

Here’s hoping reports like this are a much-needed wake-up call.

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