Gen Z accumulating debt faster than other generations

Bengaluru/New York, NT Bureau: The phrase "What's wrong with your generation is..." has been a staple of older generations' critique of the youth, and Gen Z is now under the spotlight for its rapidly growing debt.

According to a new report by The Wall Street Journal, Gen Z is accumulating debt faster than any other generation, grappling with a mix of credit card debt and student loans.

A report from Credit Karma, a free online financial service, highlights the unique financial challenges facing Generation Z, those born between 1997 and 2012.

These challenges have been intensified by rising inflation and the lasting impact of the COVID-19 pandemic. As the cost of living has surged by nearly 32% over the past decade, many Gen Z members are finding it increasingly difficult to afford basic necessities like food and housing.

To make ends meet, many have resorted to relying on credit cards, often as a last-ditch effort. Before the pandemic, in 2018, Forbes reported that Gen Z had a direct and indirect spending power of up to $143 billion, a figure that commanded the attention of brands.

However, the pandemic wiped out many entry-level jobs, creating fierce competition for the few that remained, just as more of this generation entered adulthood. Today, Gen Z is spending 31% more on housing costs than millennials did a decade ago, even when adjusted for inflation, according to the report.

Despite an economic recovery and a low unemployment rate of 4%, many Gen Z workers are feeling the squeeze as rising expenses consume a significant portion of their paychecks.

Mental health experts warn that the anxiety experienced by Gen Z during the pandemic may have contributed to poor spending habits, particularly as they transitioned from home to college or the workforce.