Love & Wisdom

The Youth Debt Crisis

How parents can help

By Stacey Black February 16, 2024


The past year has already presented several financial challenges, from record amounts of credit card debt and crippling inflation to the resumption of student loan payments for the first time in three years.

As the youngest generation in the workforce, Gen Z (age 11-26) is just beginning to understand the effects of debt, interest rates, and loans, with 68% reporting that financial concerns are severely impairing their ability to become independent adults, causing them to rely on their parents or caregivers for financial support.

As Gen Z seeks to gain stronger financial footing, parents or caregivers can help by understanding that Gen Z’s experiences are vastly different from their own. Parents of this generation can help ease this stress by imparting tangible strategies that teach young people how to take control of their finances and make the most of their hard-earned dollars as they begin building their lives and careers.

For young people, building a savings account is the most important factor when faced with financial hardship. Research shows that more than 50% of Americans cannot afford an unexpected $400 expense. A recent survey found that the number of people who reported feeling stressed following credit card usage (34%) increased significantly from 2022.

Another helpful savings tip is implementing an automated savings system. Having a percentage of a paycheck go straight into a savings account means that younger people are not tempted to spend it. Financial psychologist and author Dr. Brad Klontz found that strategies as simple as “setting and forgetting” can help consumers increase their savings by up to 73% a month.

For some young people, graduating high school and college correlates to a lot of firsts: first job, first bills, first apartments. A Rocket Mortgage survey found that only about half of Gen Zers are making budgets each month. Parents can help them get a jump-start on sustainable budgeting practices, such as identifying expenses early on and dividing them between needs (rent, groceries, utilities) and wants (dining out, shopping, subscriptions).

Budgeting isn’t just good for financial health — the practice produces tangible mental health benefits too, with doctors noting a link between budgeting and reduced anxiety. Gen Z is also much more aware of the impact of financial health on their overall well-being. Encouraging children and young adults to start budgeting even in advance of an official first job, such as with allowances or graduation money and gifts, establishes strong habits well in advance of that first paycheck.

Credit cards as well should be seen as tools that will help build credit for future purchases, like a car or house, not as unlimited funds to finance a dream lifestyle. Gen Z parents with children making their first foray into credit usage should help steer them to the best card for their specific scenario and budget.

Gen Z parents can also help their children understand that credit cards require self-discipline. They should guide their children to only use their card for expenses for which they’ve already budgeted, so they can pay the balance in full each month, improve their credit score and save money on interest and fees.

Once an attractive option for cash-strapped shoppers, buy now, pay later (BNPL) loans are coming under increased scrutiny due to the lack of transparency around interest rates and the potential to mislead consumers. While BNPL may be a good option for certain purchases, Gen Z should use caution to avoid inadvertently adding further to their debt load, especially as they are just starting out.

Additionally, Gen Z parents should remain vigilant about the type of financial education content that their children are consuming. The right mix of trusted, credentialed sources will help Gen Z maintain a diverse, sustainable balance of financial health that considers their present situations while looking ahead to the future.

As Gen Z charts an all-new course that differs in many ways from the generations before them, a few tips focused on lifetime wealth building, strong parental support, and more clarity on how mental and financial health are intertwined are the foundation they need to build a more transparent financial future.


Stacey Black, the lead financial educator at Seattle-based credit union BECU, is a Gen Z parent herself.

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