Gen Z & the Debt Trap, Part 3: Stop the Bleeding
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Hello, I'm Tadeo Ruiz Sandoval for The Wall Street Journal. This is a special edition of Your Money Briefing on Gen Z's growing debt for Sunday, August 25th. Each time I look at the $30,000 I owe, mostly in student loans, I feel sick. It feels like it's too much to pay off. And I felt the same way every time I saw how fast my generation was racking up debt. I questioned whether there was a way to get out of this debt hole. But when I talked with WSJ personal finance reporter Oyen Adedoyen, everything changed.
Not all Gen Z are cash strapped and spending like there's no tomorrow. A lot of Gen Z are pretty tech savvy and they're more involved in their finances than ever before.
Scrolling through TikTok, Instagram and other social media, Gen Zers were sharing their debt stories with each other and giving tips on how to budget and invest money. I thought maybe Gen Z has found a way to regain control of their finances. This is Gen Z and the Debt Trap, a three-part series that looks at why this generation is accumulating debt so fast, what can be done to slow the growth, and how our debt could affect everyone else. In part two, we learned about the harmful habits deepening Gen Z's debt and the consequences other generations could face because of it. In our final installment, we'll talk about financial literacy, why it's important, and how Gen Zers can use it to tackle their debt and prevent collecting more.
This is part three, Stop the Bleeding. More on how Gen Z can recover after the break.
This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day. Washington Wise from Charles Schwab is an original podcast that unpacks the stories making news in Washington. Listen at schwab.com slash Washington Wise.
20-year-old Mackenzie Somerville says she regrets a lot of decisions she's made. Decisions, she says, led her to lose her car. At 15, Mackenzie got her first job at a sandwich shop, earning $11 an hour. She says that's when bad habits crept up.
Every time I'd get a paycheck, I'd be like, OK, what am I going to spend it on?
How did this three-part series introduce Gen Z's rising debt problem?
So I would spend my full paycheck before I got paid next instead of saving it.
In high school, she got enough scholarships to cover a full ride at the University of Tennessee Chattanooga to become a meteorologist. But in her first semester in fall 2021, she says she felt a lot of academic and personal pressure that led to her mental health deteriorating.
And a month in, I quit college. And that is my biggest regret to this day.
She returned to work at the sandwich shop. Then in early 2022, she got a credit card to help build her credit history and bought a used car for $18,000. She moved from job to job until she found work at a shipping company where she earned $16 an hour. But after being late to work multiple times due to oversleeping, she says she was let go earlier this year. Now, she's earning $11 an hour as a house cleaner, which she says isn't enough to pay her bills. Her car was repossessed and being put up for auction. She owes $1,400 on her cell phone plan, which was sent to collections. Her total debt is now just over $21,000. But she estimates it'll go down to about $15,000 after her car is sold at auction. And because she can't afford an apartment, she's living at a friend's place rent-free.
I am not financially literate in any sense. I don't know what investment means. I don't know how to create a budget. I came into this. car loan thinking, oh, I'll just make the payments and it'll be fine. But I didn't really think about the long-term effects of it. So I feel like money to me now, it's a means of my downfall until I learn how to use it.
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