What is the average debt in your 20s?
Debt is part of the average American's life, and you can start to accumulate it as young as your 20s. New findings from Experian's 2020 State of Credit report show that the average Gen Z consumer (ages 24 and younger) has about $10,942 worth of debt, not including mortgages.
Debt is part of the average American's life, and you can start to accumulate it as young as your 20s. New findings from Experian's 2020 State of Credit report show that the average Gen Z consumer (ages 24 and younger) has about $10,942 worth of debt, not including mortgages.
| Generation | Average credit card debt |
|---|---|
| Baby boomers (58–76) | $6,245 |
| Generation X (42–57) | $8,134 |
| Millennials (26–41) | $5,649 |
| Generation Z (19–25) | $2,854 |
Try not to get swept up in things you can't afford – and the habit of turning to debt to get your hands on them. Using credit cards and lines of credit is a dangerous game to play in your 20s because you could be setting yourself up for a lifetime of debt repayments, a low credit score, or worse.
18-24-year-olds face crucial transitions to adulthood, including first experiences of debt and borrowing. Although they report high levels of financial worry, they are comparatively unlikely to seek support.
What's considered too much debt is relative and varies by person based on the financial situation. There's no specific definition of “a lot of debt” — $10,000 might be a high amount of debt to one person, for example, but a very manageable debt for someone else.
Additionally, younger people tend to have lower credit scores as they haven't had the time to build credit like older consumers. Consumers who are 18-29 also have the lowest average debt compared to other age groups.
$5,000 in credit card debt can be quite costly in the long run. That's especially the case if you only make minimum payments each month. However, you don't have to accept decades of credit card debt. There are a few things you can do to pay your debt off faster - potentially saving thousands of dollars in the process.
| Generation | Average Credit Card Balance March '22 | Average Credit Card Balance Feb '24 |
|---|---|---|
| Baby Boomer | $5,700 | $6,800 |
| Gen X | $6,400 | $8,900 |
| Millennial | $4,500 | $6,700 |
| Gen Z | $2,000 | $3,300 |
Debt-to-income ratio is your monthly debt obligations compared to your gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%.
At what age should I be debt free?
“Shark Tank” investor Kevin O'Leary has said the ideal age to be debt-free is 45, especially if you want to retire by age 60. Being debt-free — including paying off your mortgage — by your mid-40s puts you on the early path toward success, O'Leary argued.
Some for the first time, others seeing their existing debt get worse. Here's the thing I want to say – and this is important: There's no shame in having debt, and it's completely understandable to be stressed and anxious about it. I say that because so many people in debt do feel shame. And guilt.
The bottom line. $15,000 can be an intimidating total when you see it on credit card statements, but you don't have to be in debt forever. If you're struggling to make your minimum payments every month and you don't see light at the end of the tunnel, sign up for a debt management program to get out of debt fast.
Gen X (ages 43 to 58) not only carries the most debt on average of all the generations, but is also the debt leader in credit card and total non-mortgage debt.
Gen Z (up to age 26): 20.8% have no loan, 72.4% have one loan, 6.3% have two loans; average monthly payment is $429. Millennials (27-42): 36.8% have no auto loan, 52.9% have one, 9.3% have two; average monthly payment is $547.
Younger people are no exception. Of “young millennials” — which GOBankingRates defines as those between 18 and 24 years old — 67 percent have less than $1,000 in their savings accounts and 46 percent have $0.
The 28/36 rule dictates that you spend no more than 28 percent of your gross monthly income on housing costs and no more than 36 percent on all of your debt combined, including those housing costs.
Overall, whether or not it's "bad" to have no debt depends on your individual circ*mstances and financial goals. If you're comfortable with your current financial situation and don't have any immediate plans to use debt to achieve your goals, then being debt-free can be a positive thing.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
According to a 2019 Experian study, men carry more debt than women across nearly all categories, including credit card debt — the study found that men have $125 more in credit card debt than women on average.
Does Gen Z have credit card debt?
The news: Gen Z's credit card debt is growing faster than that of any other generation, according to data from Credit Karma.
A 2023 survey conducted by Payroll.org highlighted that 78% of Americans live paycheck to paycheck, a 6% increase from the previous year. In other words, more than three-quarters of Americans struggle to save or invest after paying for their monthly expenses.
Adam McCann, Financial Writer
It will take 32 months to pay off $5,000 with payments of $200 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
While that certainly isn't a small amount of money, it's not as catastrophic as the amount of debt some people have. In fact, a $1,000 balance may not hurt your credit score all that much. And if you manage to pay it off quickly, you may not even accrue that much interest against it.
Ideally, financial experts like to see a DTI of no more than 15 to 20 percent of your net income. For example, a family with a $250 car payment and $100 of monthly credit card payments, and $2,500 net income per month would have a DTI of 14 percent ($350/$2,500 = 0.14 or 14%).
