Outstanding consumer debt in the U.S. is currently around $14.88 trillion, representing an average individual debt of nearly $93,000. While older generations hold a bulk of this debt, the youngest adults in the country are quickly accumulating debt of their own.
Gen Zers, who range from ages 18 to 23, hold an average total of $16,043 in debt, according to data from an Experian consumer debt study. Experian analyzed its database of credit report information to measure the average credit card debt, student loan debt, auto loan debt and personal loan debt for Gen Zers who hold each type of debt.
- Average credit card debt: $1,963
- Average student loan debt: $17,338
- Average auto loan debt: $15,574
- Average personal loan debt: $6,004
The generation had the highest debt growth of any generation between 2019 and 2020, with the average balance increasing 67.2% from $9,593. Experian said in its report that the increase "seemed to track with age — the greatest growth occurred among the youngest consumer group."
The next closest growth was that of millennials (ages 25 to 40), whose average debt grew 11.5% from 2019's $78,396 to $87,448.
Although their debt is growing, members of Gen Z are in a great place to pay it off, says Greg McBride, chief financial analyst for Bankrate. Not only are they young and have plenty of time to pay, but they also have time to build strong financial habits for the rest of their lives.
"The sooner you can get in the habit of saving for emergencies and retirement, the better off you'll be in the long run," McBride says.
For most people, McBride recommends prioritizing high-cost debt like credit cards and other installment loans because they tend to have the highest interest rates. This is known as the "avalanche method" and is a money-saver in the long run because it reduces the total amount you pay in interest.
McBride also warns that credit card debt is the most dangerous kind of debt for a young person to have. "Not only do you want to pay that off as quickly as possible, you want to avoid it going forward," he says.
But everyone is different and there's no one-size-fits-all strategy. In some cases, the "snowball method" is the best way to go. This strategy has people start with their smallest debt first and work their way up to their largest debt. In 2016, researchers for the Harvard Business Review found that the snowball method actually proved to be the most effective strategy because of its motivating qualities.
"For some people, it makes more sense to have the reinforcement of getting some debts paid off," McBride says. "It might put some wind in your sails and keep you focused."