Millennials are US$1 trillion in debt – but they’re better at saving than previous generations

New findings from the New York Federal Reserve reveal that millennials have now racked up over US$1 trillion of debt.

This troubling amount of debt, an increase of over 22 percent in just five years, is more than any other generation in history. This situation may leave you wondering how millennials ended up in such a sorry state.

As important as the debt is how millennials’ economic choices vary from the expectations. Millennials are much more conservative than the debt balances may indicate. In fact, in comparison to previous generations this group is significantly more fiscally conservative.

A product of the times

U.S. millennials – Americans born between 1981 and 1996 – have experienced the cosmic duality of yin and yang like few other generations.

Millions across all generations have yet to fully recover from the global financial crisis, but displays of extreme wealth are more visible than ever, thanks to social media.

Millennials benefit from dramatic advances in health care, while living through an opioid epidemic that is now a major cause of death in the U.S. They have witnessed and contributed to monumental technological advances. At the same time, they must reconcile the ethical and financial implications of 29 years of global military actions frequently led by the U.S.

Do these experiences affect the behaviors of millennials? It seems that it has led millennials to be more conservative with their money, as is well documented in studies of this group.

Compared to other generations

While the debt levels accumulated by millennials eclipse those of the previous generation, Generation X, at a similar point in time, the complexion of the debt is very different.

According to a 2018 report from the St. Louis Federal Reserve Bank, mortgage debt is about 15 percent lower for millennials and credit card debt among millennials was about two-thirds that of Gen X.

However, student loan debt was over 300 percent greater. Student debt affects a much broader age segment than just millennials, at over 43 million borrowers, but the burden weighs most heavily on this generation.

Given the behavior of previous generations, it seems that this lower credit card debt and mortgage debt reflect millennials’ more risk-averse approach to their finances.

Another marked behavioral difference between generations is the higher levels of retirement savings among millennials than any previous generation at the same age. While Gen Xers had acquired about $13,600 at around the same point in time, millennials have saved $15,500 in retirement accounts on average.