NEW YORK, February 1, 2023 (Newswire.com) - iQuanti: The Urban Institute recently analyzed data pertaining to Generation Z. Gen Z are individuals born between the middle of the 1990s and the middle of the 2010s. The data revealed that almost 20% of individuals aged 18-24 had debt in the collections stage.
This article will explain how many Gen Z members are getting into deep debt. We'll also explain what this behavior indicates.
Gen Z's Spending Habits
Gen Z doesn't seem to be too inclined to get personal loans. Focus groups indicate they know relatively little about personal loan features and how to secure one. Instead, this generation seems to rely on credit cards for everything from emergency expenses to daily expenditures.
Using credit cards this way can be a double-edged sword. Getting them and using them for purchases can help build your credit if you pay off the whole amount you owe at each pay period's conclusion. However, you can also harm your credit if you continue carrying debt and accumulating more.
You can end up owing more and more money if you're only able to pay off the minimum amount each month. Gen Z is starting to learn this, to their detriment.
What Does This Mean?
Many financial experts feel that this trend might signal a coming recession. Some posit that one is inevitable because of how the pandemic shut down much of the economy from 2020-2021.
Gen Z is seeing rising debt coupled with shrinking savings. The trend is there with Millennials as well, but not to the same extent. This is probably because at least some Millennials had more savings when the pandemic began due to their being in the job market longer than the younger Gen Z members.
More Credit Card Usage is an Ominous Sign
Economists link more credit card usage by younger consumers to poor economic health. Many of them feel that when more Gen Z members use credit cards for everyday expenses instead of paying in cash, that indicates they think they have no choice but to borrow money. They can't save anything from their take-home pay because their jobs generally don't pay them enough to bolster their savings.
What Will Happen?
Many economists also think that more credit card usage by Gen Z does not necessarily mean that this generation doesn't know the potential risks associated with it. Instead, it indicates desperation on their part.
In recent years, many younger individuals who have joined the job market have positions that barely pay them enough to scrape by. In the face of a possible coming recession, the more motivated among them will be on the hunt for higher-paying jobs. Not all of them will find more lucrative positions, though.
Gen Z members will likely move in with roommates whenever possible if they can't afford to rent houses or apartments independently. Others will work multiple jobs. Many will also continue living with their parents or other older relatives rather than striking out on their own.
Gen Z Credit Card Usage Tells Us a Lot
Economists think they see strong evidence of a coming recession due to Gen Z's increasing credit card usage. Many of them see this generation getting into deeper debt as a direct effect of the economic slowdown the pandemic caused in 2020 and 2021.
Gen Z members are using credit cards for everyday expenses and emergencies alike. That's because they don't have savings to rely on when they need them.
This will probably cause more Gen Z members to move into shared housing situations if they can't afford to live on their own. Many will continue living with parents or older relatives, and some will work multiple jobs.
A recession is not unavoidable, but most economists regard Gen Z's higher credit card usage as a sign that one is not far away.Contact Information:
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Original Source: How Many Gen Z'ers Are Getting Into Deep Debt