Gen Z owes an average of $ 4,343 each and can’t even legally drink yet

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A decade after the Great Recession, Americans’ debt levels are on the rise again. This is true even for adults so young that they cannot legally drink.

Those in Generation Z (16-20 years old) already have an average debt of $ 4,343, according to a new survey by Charles Schwab of 2,000 young adults. Meanwhile, Millennials (ages 21-25) have so far a whopping total debt of $ 11,663, including student loans and credit card debt.

“It’s kind of a debt culture,” Carrie Schwab-Pomerantz, financial advisor, chair of the board and chair of the Charles Schwab Foundation, told CNBC.

Young American adults don’t have solid savings either. Almost half of those surveyed had saved less than $ 250.

“The children of the Great Recession are now on the verge of achieving financial independence and making decisions that will have a lasting impact on their long-term ability to build wealth,” Schwab-Pomerantz said. It is therefore worrying that there is a lot of misunderstanding about the debt. For example, one in five young adults surveyed thinks mortgages are “bad debt” and almost 40% call student loans “bad debt”. Meanwhile, 27% called revolving debits, such as credit card debt, “good debt.”

Mortgages and student loans are considered “good debt” by experts because they are generally inexpensive and can have tax advantages, and credit card debt is “bad” because they have high interest rates. higher.

It can be confusing, says Schwab-Pomerantz, but there’s an easy way to think about it. “Good debt is bad debt when you drown yourself in it,” she says. “If you have too much of anything, no matter how good it looks, it’s bad when it comes to debt.”

When it comes to student loans, she suggests taking no more, in total, so you think you’ll earn with your first year of pay. So if you think you are going to earn $ 50,000, you shouldn’t have more than $ 50,000 in student loans.

Schwab-Pomerantz recommends keeping your total debt amount, including mortgages, credit cards, cars, and other loans, to less than 36% of your total gross income.

“I understand people want to stretch, but you don’t want to drown yourself in debt,” she says.

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