By Daniel Elmore for The Political Insider
Last week, the Federal Reserve Bank of New York unveiled new insights into household debt in the United States. Their findings reveal a potentially dire future for members of Gen Z, who have dug themselves a deep financial hole.
Over the last three months of 2023, household debt surged by $212 billion, propelling the nation’s total household debt to a historic high of $17.5 trillion. This trend is even more concerning when combined with the downturn in personal savings in recent years.
Worrisome as these numbers are, the most significant problems plague the 18-29 demographic, mainly composed of individuals from Generation Z. Despite having the lowest debt levels compared to other generations, this group also has the highest delinquency rate by a wide margin—a rate of 2.27% compared to the 1.53% rate of the 30-39 age group. Likewise, Gen Z’s total debt has risen 12.6% in just the past six months, while overall household debt has only risen by 2.6%.
Throughout the entire report, the most worrisome trend for Generation Z comes in the form of high-interest credit card debt. Comprising 9% of their $1.27 trillion in debt, people aged 18-29 have a delinquency rate of almost ten percent. Such troubling figures show a grim outlook for Gen Z’s financial future as they seem to be focused on their short-term pleasure rather than long-term success.
Recent polls corroborate these findings. A Prosperity Index study by Intuit found that, instead of cutting expenses, 73% of Gen Zers prefer living in the moment. This aligns with the results of a separate survey by Bank of America, revealing that over half of Gen Zers view the rising cost of living and persistent inflation as an obstacle to their financial success. Given that perspective, it makes sense that this generation would place minimal value on saving. Undeterred by the real power of compound interest, the generation adopts a spending sentiment that prioritizes experiences over financial security.
Apart from the decline of their personal savings rate 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 a median value of under $2,000, and similarly low contribution rates, even after employer contributions. While their financial decisions suggest a lack of concern about their well-being decades from now, they also seem unaware of how their short-term mindset might limit opportunities later on in their lives.
This comes as Gen Z is notorious for having a short attention span, a trend often attributed to the seemingly endless stream of content and information available with the touch of a button. In fact, a study by Microsoft in 2015 found that the average human attention span decreased from 12 seconds in 2000 to just eight seconds in 2013. This troubling decline should not be surprising given the culture surrounding Gen Z—thirty-minute TV shows evolved into ten-minute YouTube videos, then condensed further into fifteen-second TikTok videos.
Such a desire for instant entertainment and gratification has led them down a precarious path in which a focus on the present has them procrastinating tomorrow. But just as Monday catches up with the Friday-night party-goers, the crushing reality of mounting debt, rising delinquency, and lack of long-term financial planning will come down hard on Gen Z. Their bills will come due in short order.
It’s yet to be seen whether they will continue along this destructive path. 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 is too late.
Daniel Elmore is a Young Voices contributor studying economics at Lenoir-Rhyne University. His political commentary has appeared in the Washington Examiner, DC Journal, and Carolina Journal. Follow him on X (formerly Twitter): @daniel_j_elmore