The millennial age group, contrary to popular belief, isn’t buried under debt due to their love for avocado toasts and oat milk lattes. This tech-savvy generation faces unique challenges leading to substantial debt levels, which have nothing to do with their dietary choices. From student loans and high-interest credit card debt to personal loans and pandemic-induced tax liabilities, millennials are feeling more financial strain than previous generations. If you’re a millennial grappling with financial issues, remember that you’re not alone. Let’s delve deeper into understanding millennials and debt.
1. Millennial Debt: A Comparative Analysis
A recent study revealed some startling facts about millennial debt. It found millennials to be 1.4 times more likely to file for insolvency than Generation X (42-56 years old) and 1.7 times more likely than Baby Boomers (57-76 years old). The average millennial in debt is around 33 years old and owes approximately $47,283.
Given the repercussions of the COVID-19 pandemic and looming recession fears, it’s not surprising that millennials are burdened with higher debt levels than their predecessors. However, many millennials consider debt as an unavoidable part of modern society, a stepping stone to achieving their goals.
2. Factors Influencing Millennial Debt
Various elements contribute to the burgeoning millennial debt crisis. Here are some key factors:
2.1. Skyrocketing Educational Expenses
The cost of higher education has dramatically increased over the years. In Canada, the average student debt for a bachelor’s degree is around $28,000, and for a college diploma, it’s approximately $15,300. The rapid accumulation of interest on these loans often catches students off guard, making loan repayment a prolonged process.
2.2. Soaring Housing Prices
The recent spike in housing prices has hit Canadians hard. Home prices in Toronto, for instance, have surged by 453% since 1996. The average home price in Ontario stands at a whopping $928,897, making home ownership nearly impossible for many millennials. As a result, more people are resorting to rentals, which have also seen a significant price hike with the average Canadian rent exceeding $2,000 per month.
2.3. Challenging Job Market
Millennials are up against numerous economic hurdles like job instability, stagnant wages, and intensified competition for lucrative positions. These issues hinder their ability to pay off debts and accumulate wealth. With widespread layoffs throughout 2022 and 2023, the job market has become even more challenging.
2.4. Inflation
Inflation is a major concern for young Canadians as prices for everything from groceries to raw materials have risen due to increased energy costs, supply chain disruptions, and high demand. The Bank of Canada is closely monitoring the situation to manage inflation and sustain Canada’s recovery. However, for millennials, it simply means a steeper cost of living.
2.5. Consumer Debt
Owing to all the reasons mentioned above, millennials are more likely to have high levels of consumer debt, like balances on their credit cards or personal loans. It’s crucial to understand the difference between “good debt” and “bad debt.”
3. How Can Millennials Manage Their Debt?
Being a millennial in debt is nothing to be ashamed of as debt has become a part of modern life. However, if you’re burdened with more “bad debt” than you can handle, there are solutions available.
A Consumer Proposal can be a great option if you’re struggling to manage your debt. It’s a formal, legally-binding debt settlement agreement between you and your creditors, regulated by the Canadian Government and can only be submitted on behalf of a Licensed Insolvency Trustee (LIT). A Consumer Proposal can reduce your debt by up to 80% of what you owe and can afford. Moreover, it halts all further interest and legal action between you and your creditors.
4. The Final Word
The world has undergone significant changes over the past few decades, and millennials face unique debt-related challenges compared to earlier generations. However, being a millennial also comes with several perks, like technological savviness, the opportunity to work in creative or entrepreneurial fields, and the freedom to express oneself without fear of judgment.
If you’re worried about high-interest “bad debt,” don’t hesitate to reach out to Farber Debt Solutions. They provide the tools to manage your debt effectively, instilling confidence and relief that a solution to your debt issues is indeed possible.
In the end, understanding millennials and debt is about recognizing the unique challenges this generation faces while acknowledging their potential to overcome these hurdles.
