Are young adults in financial hot water?To come to their conclusions, researchers used a statistical model to determine how much credit card debt different demographic groups will have at the same stage of their lives. According to the results, children born between 1980-1984 -- also known as Millennials -- are projected to owe $5,689 more in credit card debt than those born between 1950-1954, a generation many Millennial parents belong to. The debt of Millennials is projected to be $8,156 greater than those born between 1920-1924, a group meant to capture their grandparent's generation. While the level of credit card debt is concerning enough alone, it is not the only red flag that appears regarding the financial future of young adults. According to the study's authors, the data also suggest Millennials may continue to charge purchases until they are 70 and may even die owing money on bank cards. "Our projections are that the typical credit card holder among younger Americans who keeps a balance will die still in debt to credit card companies," said Lucia Dunn, an OSU economics professor and a co-author of the study, in a written statement.
Avoiding the credit card trapPart of the problem of perpetual credit card debt seems to be linked to slow pay-offs among young adults. According to the OSU research, children born between 1980-1984 have payoff rates that are 24 percent lower than their parents and 77 percent lower than their grandparents.
However, young adults can speed up their payoffs simply by giving a boost to their monthly payments. The study notes that young adults making 2 percent minimum payments on a $1,000 balance at 19 percent interest will take eight years and four months to pay off the card. However, increasing the minimum payment to 5.8 percent cuts the payoff time to one year and nine months.Once their credit cards are paid off, young adults may benefit by bulking up their savings account to minimize the risk of needing to use credit cards in the future. Creating an emergency fund in a separate online savings account may be advisable to provide funds that are accessible in an emergency, but not a constant spending temptation. By building savings and sticking to a written budget, today's young adults may yet avoid the plague of confronting credit card debt in old age. MoneyRates.com has always searched interest rates to find you the best rate. Savings interest rates may be low, but that's all the more reason to shop for the best rate. Check out the top savings interest rates from Ally Bank, American Express and others.