The Millennial Wealth Gap – What Contributes to Their Debt

The Millennial Wealth Gap: What Contributes to Their Debt?

Thanks to the media, there are a lot of misconceptions about millennials. A quick search online on “millennials” and results show how these 30-something individuals are unmotivated, unprofessional, or irresponsible with money. Most articles tend to stereotype the generation into ignorant, carefree people who are unprepared for any responsibility. That, however, is unfair and untrue. 

First, millennials are not teenagers. These are people who were born between the years 1980 and 1994, which means the oldest people in this bracket are already in the early 40s. 

That said, there’s one sad truth about this generation that others are focusing on: millennials have more debt than people from previous generations. Based on a Statistics Canada report, in 1999, Gen-Xers were at a 125% debt-to-after-tax income ratio. That almost doubled with millennials in 2016, who had a 216% debt-to-after-tax income ratio. 

In this post, Debt Helpers will shed some light on the possible causes behind millennials’ huge debt.

What Factors Contribute to Millennial Debt Statistics?

A Huge Increase in the Cost of Higher Education

It has long been established that higher education is the solution to most adult issues in the future. Therefore, if one is to increase earning potential, they must secure a degree. What’s not being discussed, though, is the rising cost of higher education compared to how much it was a few generations ago. 

It was noted on Forbes Wealth Blog that tuition fees had tripled on average from the school year 19993 -1994 to 2015 – 2016. Considering that almost 6 in every 10 Canadian adults have completed university or college, it’s understandable that a considerable chunk of the millennial’s debts is from the cost of their education. Indeed, student loan debt is a huge factor in the overall debt of millennials, but that’s just the beginning. 

Higher Cost of Home Ownership

Advisor.ca stated that 46% of millennials who do own a house admit to receiving financial assistance from their parents. That said, millennials take about 13 years to save for the 20% required downpayment for a home. Compare this to the five years it took adults in 1976 to save for the amount needed for a downpayment. It’s a reflection of how much the cost of properties has risen since the past generations.  

In 1971, the average price of a house was $30,426, which in 2014 value was only $190,388. In 2014, however, the average cost of a house was $566,696. That means, even after adjusting for inflation, it’s undeniable that the average price of homes these days has more than doubled. 

Credit Card Debt

There are roughly 76.2 million credit cards in circulation in the country—almost two cards per Canadian. While 70% of Canadians pay credit card balances in full every month, the overall millennial credit card debt can still increase significantly fast due to various circumstances. 

One example is when many millennials got laid off from work when the pandemic started. Because of this, many millennials failed to pay their bills. Aside from that, many go through significant life changes that are unanticipated that people cannot help but turn to their cards. 

Conclusion

These are just some of the reasons millennials have a higher debt than previous generations. That said, it doesn’t mean nothing can be done about it. With careful financial planning, proper budgeting, and the guidance of seasoned debt consultants, millennials can work towards becoming debt-free in the future. 

DebtHelpers.ca is made up of some of the best and most reliable debt consultants in Canada. Experts from the team can provide customized debt solutions to all Canadians who wish to become debt-free. Contact DebtHelpers.ca today!