A quarter of millennials say most of their debt is credit cards, not student loans
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- Millennials who carry debt report owing an average of $27,900 in personal debt.
- Forty percent of millennials say their biggest source of debt is either credit cards or their mortgage, not their student loans, according to a new Northwestern Mutual survey.
- Despite credit cards being the biggest source of debt for one in four millennials, about 22% don't know the interest rate they're being charged.
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Student-loan debt feels ubiquitous among young Americans, but about 40% of millennials say it's actually not the biggest balance they owe.That's according to a new survey from Northwestern Mutual published as part of its annual Planning & Progress Study. The financial company asked roughly 2,000 American adults about their current debt load - the sources of their debt, how much they owe, and how much of their monthly income goes toward paying down their balances.Advertisement
The survey comprised 503 Gen Zers, 672 millennials, 595 Gen Xers, and 441 baby boomers. On average, millennials who carry debt report owing a total of $27,900 (excluding mortgages), slightly less than baby boomers and about $8,000 less than the average amount Gen Xers owe.
Interestingly, one-fourth of the millennials surveyed said the main source of their overall debt is credit cards, while 15% said it's their mortgage, and just 10% said it's their student loans. Northwestern Mutual uses Pew Research Center's definition of millennial: Americans born between 1981 and 1996, who are ages 23 to 38 in 2019.According to the 2016 Survey of Consumer Finances, nearly 45% of American families headed by someone under age 35 carry credit-card debt - about the same share who carry student-loan debt. Meanwhile, far fewer of those younger families have a mortgage - just 28% - although those balances tend to be larger than other types of debt.
Too many millennials who carry credit-card debt don't know how expensive it is
Despite credit cards being the biggest source of debt for one in four millennials, about 22% don't know the interest rate they're being charged, the Northwestern Mutual survey found. What's more, a plurality of all indebted Americans surveyed (34%) don't know how much of their monthly income goes toward paying down their personal debt."Our data, along with national numbers, show that people continue to struggle with finding the right balance between spending now versus saving for later," Emily Holbrook, senior director of planning at Northwestern Mutual, said in a press release. Millennials carry a much greater debt load than their parents did at their age, with their liabilities accounting for 44% of their assets, according to a MagnifyMoney report. Debt is a struggle even for wealthy millennials. A previous survey from the financial-services firm D.A. Davidson revealed that over one-third of millennials with at least $250,000 in investable assets believe they'll retire with debt.Advertisement
While there is so-called "good" debt and "bad" debt, according to some financial planners, debt with high-interest rates (namely: credit cards) can be a wealth killer if not managed wisely.
"There are steps people can take to get control of their debt. It might start with loan consolidation and a budget, then move to a longer-term plan that includes guardrails to help people stay on track," Holbrook said. "The most important part is to take action. It's often those first few steps that can be the hardest and most important."More personal finance coverageAdvertisement
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