Despite popular opinion, avocado toast and oat milk lattes are not actually to blame for millennial debt! Believe it or not, millennials do face significant generational challenges that heavily contribute to debt levels (that don’t have anything to do with avocados).
Between student debt, high-interest credit card debt, personal loans, and post-pandemic tax debt from collecting CERB, millennials feel the crunch more than earlier generations. So if you’re a millennial feeling the economic strain, don’t be too hard on yourself because you’re certainly not alone.
Let’s take a closer look at some of the reasons millennials carry more debt than previous generations.
The differences between millennials and older generations when it comes to debt
A new study found that millennials were 1.4 times more likely to file for insolvency on a per-population basis than people in Generation X (people aged 42-56) and 1.7 times more likely than baby boomers (aged 57-76). It also found that millennials in debt were, on average, 33 years old and owed an average of $47,283.
Considering these details, along with the impact of COVID-19 and recession fears, it should come as no surprise that millennials find themselves dealing with higher amounts of debt compared to previous generations. However, many millennials think that debt has become inevitable in today’s society and is seen as necessary to achieve their dreams.
Regardless of how you view debt, let’s explore some of the key factors that contribute to millennial debt.
1. Student debt
Post-secondary school has become extremely costly in recent years. In Canada, students carry an average debt of $28,000 for a bachelor’s degree and $15,300 for a college diploma. Many students are surprised at how quickly interest is charged on these loans and how long it can take to pay them back.
2. Housing costs
We all know that most Canadians are dealing with skyrocketing housing prices. In Toronto, for example, home prices have increased by 453% since 1996. The average home price in Ontario currently sits at $928,897, making it nearly impossible for many millennials to buy a home. So, more people than ever are renting and for longer periods of time, and rental costs have gone up significantly – with a Canadian average of more than $2,000 a month.
3. Job market
Millennials face many economic challenges, such as job instability, no wage growth, and more competition for well-paying positions. These things get in the way of their ability to pay off debt and collect wealth. Unfortunately, layoffs have been common throughout 2022 and 2023, making it a challenging time for many.
Inflation is a major concern for many young Canadians. Prices for everything from groceries to raw materials have increased due to higher costs of energy, supply chain disruptions, and high demand. The Bank of Canada – Canada’s central bank – is closely monitoring the economy to manage inflation and sustain Canada’s recovery. But for millennials, it just means everything is much more expensive.
5. Consumer debt
Partially because of all the reasons mentioned, millennials are more likely to have high levels of consumer debt, like a balance on their credit card or a personal loan. This is why it’s important to note the difference between “good debt” and “bad debt.”
How we can help
If you’re a millennial with debt, it’s nothing to be ashamed of – debt is simply a part of modern-day life for many. But, if you’re carrying too much “bad debt” than you can comfortably handle, there are solutions to help you manage. A Consumer Proposal is an excellent option if you don’t feel in control of your debt. It’s a formal and legally-binding debt settlement agreement between you and the companies you owe money to. The solution is 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 actually afford. Plus, it will stop all further interest and legal action between you who you owe.
The final word
The world has changed drastically in the last few decades, and millennials face unique challenges when it comes to debt compared to earlier generations.
But being a millennial also comes with a lot of advantages, like using technology with ease, working in more creative or entrepreneurial fields if you’d like, and having the freedom to express yourself without fear of judgment. And how could we forget about the rise in popularity of avocado toast?
All jokes aside, what we’re trying to say is it’s not all bad. But, if you are concerned about high-interest “bad debt,” contact us at Farber Debt Solutions today. We’re here to listen and give you the tools to help you feel confident and relieved that a solution for your debt is possible.