Each generation believes it faces greater challenges than those that came before. In a way, each generation is correct. The challenges keep changing, forcing young people to cope with problems there parents didn’t face. Our grandparents may have struggled with poverty during the Great Depression, but many modern young adults face a slightly different crisis: a crisis of debt.
Mindy Fetterman and Barbara Hansen of USA Today have written a piece exploring the debt problems facing young adults. This article is the first in a six-part series exploring these issues. Despite some alarmist reporting, there’s interesting stuff here. For example, the authors report that:
- Nearly two-thirds of twentysomethings carry debt. Those who do have debt have taken on more in the past five years.
- Nearly half of twentysomethings have stopped paying on a debt. (This stat shocks me — when did this become acceptable?)
- Sixty percent of twentysomethings believe they face tougher financial pressures than previous generations.
The article discusses the misperceptions that older generations have regarding young people’s debts. The authors believe that while some young adults do get into debt through poor choices, a majority of the problem comes from larger economic effects such as:
- Soaring tuition
- Reduced student grants
- Increased student-loan debt
- Flat wages, especially for young men
- Rising home prices
As a result, more young people are relying on their families for support, both for housing and for money. Young people are also saving less than before, which alarms me. The article quotes several people who essentially complain, “I cannot afford to save.” I used to believe this, too, but I was wrong. I’m still paying the price for being wrong. Most people can afford to save something, even if it’s just $50 a month. Remember: compound returns favor the young.
The article provides a link to a very rudimentary budgeting spreadsheet. (I’d like to think you can find better options in this list of handy personal finance spreadsheets I shared in May.) It also points to some useful resources:
- The Financial Planning Association
- Quarterlife Crisis (Has anyone read this book? Would you care to review it for GRS?)
- The National Endowment for Financial Education
- Smart About Money
- Project on Student Debt
Despite occasional bits of sensationalism, this is a good article, and I look forward to reading the rest of the series.
Addendum: Jeremy notes that he just posted his perspective on the article at Generation X Finance.
[USA Today: Young people struggle with the kiss of debt]