Nearly half (48%) of Gen X and baby boomers agree credit cards now function as a survival tool and 43% agree lots of smart, hardworking people who are careful with spending also have a lot of credit card debt.
According to Generations Apart – a new study from Allianz Life Insurance Company of North America twice as many Gen Xers (27% versus 11% of boomers) say they are either unsure about when they plan to retire or don’t plan to retire at all.
Allianz Life’s study of 2,000 Americans – including 1,000 baby boomers (ages 49-67) and 1,000 Gen Xers (ages 35-48) – examined financial attitudes and current finances for each generation, including total household debt. The study found that Gen Xers are carrying 38% more in mortgage debt (average of $144,000 versus $90,000 for boomers) and 45% more in non-mortgage debt, comprised of student loan debt (average of $12,000 versus $5,000 for boomers) and credit card debt (average of $8,000 versus $6,000 for boomers).
Tackling the debt issue will likely be a significant challenge for many Gen Xers. More than a third (36%) of Gen Xers in Allianz Life’s study said they currently have more than $5,000 in credit card debt and a quarter admitted to carrying more than $10,000. In addition, 15% of Gen Xers said they also owe money to their parents. More than four in 10 (41%) Gen Xers say they are not comfortable with the amount of debt they have, while just a quarter of boomers reported feeling uneasy with their debt.
The increasing comfort/acceptance of living with debt makes a behavioral change from Gen X in the near future seem unlikely, meaning many Gen Xers will have less money available for savings and will miss out on decades of compound interest. In addition to carrying more credit card debt and debt in general, more Gen Xers are seeing debt as a necessary way of life. One in five Gen Xers believe that going into debt to handle day-to-day purchases is “just a fact of life” versus only 14% of boomers.
While one reason that Gen Xers have higher debt may be related to earlier use of credit cards – more than three-quarters (76%) of Gen Xers got their first credit card at age 18-24 versus 68% of baby boomers – the bigger concern is how they currently use credit to finance their lifestyles. Nearly half (46%) of Gen Xers said they revolve their credit card balances (only paying a portion each month) compared with only 32% of boomers. Without doubt, this strategy is having a negative effect on their ability to save for the future as more Gen Xers (23% versus 19% of boomers) said they believe “you can’t save for retirement until you pay off credit cards.
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