Debt isn’t only a serious problem for older generations in Virginia. According to a survey of 2,000 young adults by a leading bank and brokerage firm, individuals ranging in age from 16 to 20, referred to as Generation Z, have an average debt of just over $4,300. Their young millennial counterparts, who range in age from 21 to 25, have an average debt of nearly $12,000, which is largely fueled by college loan and credit card debt.
Even financial concerns related to the last recession haven’t changed the fact that, according to some financial advisors, it’s still a “debt culture.” While young adults have a sizeable debt, they don’t have an equally robust savings. Nearly half of the respondents surveyed reported having less than $250 stashed away. The concern with Generation Z debt habits and attitudes stems from the fact that these individuals will soon be making decisions that could affect their ability to build wealth.
Financial experts generally consider debt from student loan and mortgages to be “good” since there are tax advantages associated with this type of debt. One in five young adults surveyed considered mortgages to be “bad debt,” and 40 percent had the same attitude about student loan debt. However, nearly 30 percent of respondents considered credit card debt and other types of revolving debt to be good. In reality, this isn’t true because of high interest rates that can make this type of debt difficult to pay off since it continues to accumulate over time.
One financial advisor suggests that people of all generations keep their debt to roughly 40 percent of their total gross income. For times when debt becomes overwhelming, bankruptcy is a solution often considered. Before proceeding with this option, an attorney may attempt to make arrangements for an acceptable repayment plan with creditors. After exploring other options, a lawyer might suggest bankruptcy if a point has been reached where debt collection agencies are consistently calling, wages are being garnished or legal action is being threatened or pursued.