Though many young Americans may see their 20s as a time to gain some amount of financial independence, a large number are also struggling under the weight of significant debts on several lines of credit.
The average American 20-something carries debt totaling $45,000, and that amount increases for millenials as they move toward their 30s, according to a new study from the PNC Financial Services Group. While Americans between the ages of 20 and 21 have just $12,000 in debt to their name, on average, those who are 28 and 29 carry more than $78,000 in outstanding balances.
Experts believe this can make it quite difficult for young people to establish their financial independence, and stress the importance of properly maintaining good spending and debt repayment habits, the report said.
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“Twenty-somethings are challenged with a balancing act between saving for the future and paying down their debt,” said Shannon Johnson, director, of consumer checking and rewards at PNC. “Though budgeting can seem overwhelming, millennials have the luxury of time to develop a strategy and more resources than any other generation to better manage their money and achieve their financial goals.”
More than half of consumers in their 20s carry some amount of student loan debt, as well as credit card debt, car loans and mortgages, the report said. In all, 20% of those in their early 20s had credit card debt, 9% had car loans and 3% had mortgages. But by the time borrowers reach their late 20s, 48% have credit card debt, 38% have auto loans and 29% have home loans.
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Young adults may want to consider the value of being more fiscally responsible, particularly by limiting their credit card spending to only necessary purchases. Doing so will help them to put more money into savings, or contribute it to their installment loans instead.
And when they do need to incur some credit card debt, they should always be sure to pay it off at the end of every month. Doing so will help them to maintain a healthy credit score, which in turn may give them access to better terms – such as reduced interest rates or fees – on the other lines of credit they may seek as they age.
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