In the era of COVID-19, millennials and Gen Z are now the fiscally responsible members of society, while baby boomers spend, spend, spend.
LendingTree, an online loan marketplace, conducted a study that analyzed over 340,000 anonymous credit reports from their users. Remarkably, millennials reduced their average amount of debt by $9,117 between 2019 and 2021. This was largest decrease in money owed by any generation group. For Generation X, the average debt declined $3,770, while for Gen Z it declined $2,500, a smaller dollar figure but representing a higher percentage of the age group’s total debt, according to LendingTree.
Comparatively, boomers increased their debt by the largest amount over the same period, which was a substantial $8,848.
Over the years, younger generations have been subjected to criticism for their poor money management and difference in financial priorities from older generations. Millennials and Gen Zers tend to focus on experiences, thus spending their money on travel, concerts, festival, happy hours, restaurants, and coffee. The main concerns of many boomers at this stage in life revolve around retirement and healthcare. So what changed?
Matt Schulz, LendingTree chief credit analyst, said, “In most cases, the pandemic wasn’t the economic meltdown for baby boomers that it was for younger generations, so many boomers may have still felt comfortable taking on a little bit of debt because they felt secure in their financial situation.”
Millennials and Gen Z have faced more debt-centric challenges since many more jobs now require a college education. The cost of a four-year college degree in the United States has skyrocketed over the last few decades, rising much more dramatically than the rate of inflation. The amount of debt a dollar could stretch around has drastically shrunk.
Student loan debt accounted for a huge amount of millennial and Gen Z debt at 20.4% and 24.6% respectively. For boomers, 69.6% of their debt was in mortgages. The study also looked at personal loans, credit cards, and auto loans.
It seems the influx of fear, student loan interest pauses, stimulus checks, and the nonexistence of entertainment allowed younger generations to have more money to combat their debt with.