Opinion
By Daniel Elmore for The Political Insider
Last week, the Federal Reserve Bank of New York released new data on household debt in the United States. Their findings reveal a potentially dire future for members of Gen Z, who have dug themselves into a deep financial hole.
In the final three months of 2023, household debt increased by $212 billion, pushing the nation’s total household debt to an all-time high of $17.5 trillion. This trend is even more worrying when combined with the decline in personal savings in recent years.
As troubling as these numbers are, the most significant problems affect the 18-29 demographic, which is primarily made up of Generation Z individuals. Despite having the lowest debt levels compared to other generations, this group also has the highest rate of delinquency by a wide margin: a rate of 2.27% compared to the rate of 1.53% for the 30-39 age group. Likewise, total Gen Z debt has increased by 12.6% in the past six months alone, while overall household debt has increased by just 2.6%.
Throughout the report, the most concerning trend for Generation Z comes in the form of high-interest credit card debt. Making up 9% of their $1.27 trillion in debt, people aged 18 to 29 have a default rate of nearly 10%. Such worrying figures show a bleak outlook for Generation Z’s financial future as they appear to focus on short-term pleasure rather than long-term success.
Recent surveys confirm these results. A Prosperity Index study conducted by Intuit found that instead of cutting expenses, 73% of Generation Z prefer to live in the moment. This is in line with the results of a separate Bank of America survey, which reveals that more than half of Generation Z see rising costs of living and persistent inflation as obstacles to their financial success. Given this perspective, it makes sense that this generation places minimal value on saving. Undeterred by the real power of compound interest, the generation adopts a spending sentiment that prioritizes experiences over financial security.
Aside from declining personal savings rates in recent years, Gen Z also appears to be less interested in retiring early, if at all. This can be seen in their low 401(k) account balances, which have an average value of less than $2,000, and equally low contribution rates, even after employer contributions. While their financial decisions suggest a lack of concern for their well-being decades from now, they also seem unaware of how their short-term mindset could limit opportunities later in their lives.
This is because Gen Z is known for having a short attention span, a trend often attributed to the seemingly endless stream of content and information available at the touch of a button. In fact, a study conducted by Microsoft in 2015 found that the average human attention span declined from 12 seconds in 2000 to just eight seconds in 2013. This troubling decline should come as no surprise, given the culture surrounding Gen Z: programs Thirty-minute TVs evolved into ten-minute YouTube videos, then further condensed into fifteen-second TikTok videos.
Such a desire for immediate entertainment and gratification has led them down a precarious path where focusing on the present leads them to procrastinate on tomorrow. But just as Monday catches up with Friday night partygoers, the crushing reality of mounting debt, rising crime and a lack of long-term financial planning will hit Gen Z hard. Their bills will come due before long.
Whether they will continue on this destructive path remains to be seen. If Gen Z hopes to have a successful future, they must seize the opportunity to prioritize financial literacy, responsible spending habits and long-term planning before it’s too late.
Daniel Elmore is a Young Voices contributor studying economics at Lenoir-Rhyne University. His political commentary has appeared in the Washington Examiner, the DC Journal and the Carolina Journal. Follow him on X (formerly Twitter): @daniel_j_elmore