Eighty percent of Americans have some form of debt — from student loans to credit card. Some people born before World War II, are still paying off mortgages and credit cards. 90 percent of them, now retired, are carrying debt later into life. Studies show that subsequent generations carry even larger burdens.
Baby boomers on average have far more debt than their parents did at the same age. And 13 percent of boomers are still paying off student loans, either for their children, or because they went back to school later in life.
Generation X — those born between 1965 and 1980 — are on track to be even more indebted. As a group, they’ve reduced their mortgage debt in recent years, but the average Generation X-er still has $88,000 in debt. And now they face their own kids’ college costs, which raises another question — will they be able to help their children in the way that they would like to?
Millennials are different because fewer of them are taking on mortgages. Half of them have less than $1,000 in liquid assets, which suggests that they are not doing as well financially as their parents. In any case the subprime mortgage crisis may have made younger generations more skeptical about taking on debt. (based on an article on th NPR website).
My father never actually owned anything in his life. He rented his total of 28(!) homes (sequential I must add) until I insisted he benefit from the huge increase in property prices, an increase he had largely missed. Everything he did he did on straight bank loans. “Always use other people’s money if you can”, he would say. For myself, I try to follow Epicurean teachings: seek pleasure, not pain; strive for peace of mind, not big houses and fancy cars. Partly because of my father’s version of consumer economics, I loathe being in debt to anyone. Avoiding it as much as possible gives you a feeling of independence.
As a British student, I’m very lucky because my parents are paying for my living costs and university, and will probably at least contribute to a deposit should I choose to buy a house in the future. Unfortunately most people are not in my fortunate position. The biggest cause of high debt in the UK is high house prices- which in turn, are caused by quantitative easing, low interest rates, a lack of housebuilding and overpopulation. But no one in politics wants to fix this problem. The geniuses at the Bank of England think the economy needs more debt as a form of monetary stimulus. I think the opposite: that the economy is already growing and unemployment is low; anymore monetary stimulus will cause the economy to overheat, driving up commodity and house prices. This is great for the rich, who already own a lot of assts. But its bad news for young people like me, who don’t. And because no one will reverse Gordon Brown’s decision to make the Bank of England independent, nothing can be done. Its not surprising that many of my fellow students are pessimistic.