The Generational Debt Gap
There have been many stories about younger generations struggling with their finances. There is a belief that younger generations are incurring too much unmanageable debt, the kind of debt that cannot be resolved without drastic hardship. There is a fear that the younger the generation is, the more unmanageable debt they have today and will have in the future. We wanted to look into this a bit further by examining a study done by Experian earlier this year. Let's see if this generational debt gap is truly something we should be worried about, or just a normal fact of life.

SEE: Student Loans: Paying Off Your Debt Faster

Types of Debt
There are a few different types of debt, and it is important we look at these types separately. We will be looking at the most common types of debts, which are: mortgages, credit cards, and loans. Mortgages are the most common types. In fact, first mortgages make up the largest type of debt for all generations. Credit cards are also very common, and these will include both bankcards and retail cards. Loans are common as well. We will break loans down into two categories: auto loans and student loans. We will be comparing all of these types of debt to the U.S. averages.

The U.S. Average
The average allocation of debt in America will probably not surprise most. Most of the debt is allocated to mortgages, with roughly 72.6% going to the first, and about 8.3% going to the second mortgage. The next highest amount of debt for the U.S average goes to auto loans and bankcards, with an allocation of 5.8% and 4.2%, respectively. Student Loans have an average allocation of around 2.9%, and retail cards 0.5%. The average total amount of debt in America is $78,030.

The Greatest Generation
The Greatest Generation is anyone born between 1901 to 1945, and it is the oldest generation that we will be looking at. This generation actually has the second-least average amount of debt. With an average amount of debt around $38,000, the greatest generation has just over 50% less debt than the U.S. average. This makes sense when you consider that they have had the most amount of time to pay off the debt that they have incurred over the years and money wasn't as inflated back then either. What is interesting, however, is that the Greatest Generation seems to like their cards. Roughly 6.7% of their debt is allocated to cards compared to the U.S. average of 4.7%.

Baby Boomers
Born between 1946 and 1964, the baby boomers got their name because they were born in a time that included a 14-year increase in birthrate worldwide. Having the second most amount of debt at an average of nearly $102,000, the baby boomers have an average of approximately 30% more debt than the U.S. average. They are right in line with the U.S. average for how much of their debt is allocated to cards, but have less of their debt allocated to loans, with 4.8% going to auto loans and 1.4% going to student loans.

SEE: How Retirement Attitudes Of Baby-Boomers And Gen-Xers Differ

Generation X and Y
Generation X and generation Y actually overlap a bit. The X generation can be classified as those born between 1965 and 1985, and the Y generation can be classified as those born between 1978 and 1990.

Generation X has the highest amount of debt out of all the generations. With an average debt amount of about $111,121, generation X has 42% more than the U.S average. For allocation of debt, generation X is less than or equal to the U.S. average in all categories except first mortgage and student loans which they are higher. This is probably because they are the generation to have most recently purchased/mortgaged a home, and are still working on paying off some student loans too.

Generation Y has the least amount of debt. With an average amount of just under $35,000, they have 55% less debt than the U.S. average. They are also below the U.S average when it comes to the amount of debt allocated to mortgages, which makes sense since the majority of them have likely not yet purchased/mortgaged a home. However, they do have more of their debt allocated to cards and loans compared to the U.S. average, which also makes sense since they are more likely to have fresh auto and student loans, and may still be learning how to use and manage cards properly.

The Information in Table Format

First Mortgage Second Mortgage Bankcard Retail Card Auto Loan Student Loan Avg. Debt
Greatest Generation 66.6% 13.4% 6.0% 0.7% 5.2% 0.7% $38,043
Baby Boomer 72.1% 10.2% 4.2% 0.5% 4.8% 1.4% $101,951
Generation X 76.3% 5.9% 3.6% 0.5% 5.8% 3.3% $111,121
Generation Y 59.9% 1.4% 5.2% 1.0% 13.7% 15.1% $34,765
U.S. Average 72.6% 8.3% 4.2% 0.5% 5.8% 2.9% $78,030
Table Courtesy of Experian

The Bottom Line
There are some differences in debt amounts and allocation between generations, but these differences seem to have logical explanations. The oldest and youngest generations have the least amount of debt because they have either not yet purchased their first home, or they have had enough time to pay it off. However, the middle generations (baby boomers and generation X) have the most because they now have mortgages to pay off along with other types of debt. The only concern I have about our youth's finances is in the fact that they have quite a bit of card debt and loan debt compared to other generations and the U.S average. They will need to learn how to better manage their credit debt so that they can pay off their loans effectively and not find themselves in a deep hole once they get their first mortgage. Hopefully, with a little bit of education and guidance, this won't be too much of a problem.

SEE: Digging Out Of Personal Debt

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