The following post is by MPFJ staff writer, Catherine Alford. Cat is a freelance personal finance writer who blogs at www.BudgetBlonde.com.
It’s not really a secret that many people in their 20’s and 30’s struggle with debt. However, what I didn’t realize is that young people today have thousands of dollars more in debt than our parents and grandparents did at our age according to a recent article published by NBC news.
Why are we in more debt than our parents? What went wrong?
Here are some possible explanations:
Rising Tuition Costs
The average student loan debt in our country is $25,000. Mine is currently at $36,000. My husband’s is well into the six figures. This is due to pursuing graduate educations but also to the ever increasing tuition costs. They are going up so rapidly that I wonder how I will ever afford to send my kids to college.
The last thing I want is for my kids to be strapped with their own student loans. We’re supposed to make things better for them, right?
I’m not sure what can be done to combat this, since universities certainly aren’t going to lower their tuition rates. What I might do is send my kids to a community college or have them complete some online college classes while they are still in high school to hopefully shave off a year or two of their tuition costs.
Increase in Materialism
There are so many more things to buy than there were when our parents and our grandparents were our age. With the dramatic rise in technology, there are an unlimited amount of expensive gadgets that everyone just has to have. Regardless of whether or not they can afford one, many people have big screen TVs, smart phones, and nice cars.
Essentially, we’ve redefined what “needs” are. The line between needs and wants is much more muddled these days.
Our grandparents would have never even considered a nice meal out during the Depression. Why, when we’re in our own recession, do we have so much trouble living with less?
The Connectivity of Our Generation
You’ve heard it said many times before: We’re more connected than ever before. There are obvious benefits to this, such as talking to friends and family all over the world with great ease, working with businesses across continents, and staying in touch with friends from grammar school.
Yet, the connectivity has also been detrimental to our generation. It’s allowed people to see celebrities tweeting their latest travel destination and reality TV stars buying million dollar mansions. It’s made us feel “closer” to those who live extravagant lives, further perpetrating the myth that we should all live that way (or even worse, that we all deserve to live that way.)
This connectivity has also inspired a lot of comparison and competition, especially among friends. How many times have you felt down about your own marriage or your own children because of something someone else posted on Facebook? How many times have you felt jealous because someone posted about their shopping spree, showcasing their “hauls” on YouTube? All of these issues contribute to the rising need for our generation to buy more things to try to project a positive, ”richer” image to others.
We have to get better about this, and it starts with maintaining more of a level head when it comes to spending.
Lack of Financial Literacy
While rising tuition costs, the recession, and our connectivity all contribute to the debt issues that our generation currently faces, the real perpetrator is a lack of financial literacy. I can’t remember anyone sitting down and telling me to be careful about taking out student loans. In fact, many encouraged me to do it to make my life easier.
While I had to complete several “quizzes” online for my college loans to go through, I didn’t really understand what I was reading. All I really gathered from it was that I’d have to pay them back someday, something that was easy enough to understand.
I fully acknowledge that the information was out there for me to learn about myself, and I should have. I should have sat there and crunched the numbers to understand what I was really, truly doing. But, I didn’t. And neither did millions of other college students my age who took out large loans to go to school and graduated in the middle of a recession.
In my very humble opinion, financial literacy is what we need to tackle first in order to make some much needed changes around here. Essentially, if we don’t teach our kids the hard financial lessons we’ve learned, this debt situation could get much, much worse when it’s their turn.
How about you all? Why do you think that we have more debt than our parents? Is it for the reasons listed above, a combination of them, or something else entirely?
Share your experiences by commenting below!
***Photo courtesy of http://advocacyinternational.co.uk/wp-content/uploads/2010/07/Debt-Cartoon_banner3.jpg
