Differences in Debt Holdings and Financial Satisfaction Across Age During COVID

Access to credit has allowed many individuals to reach their own version of the American dream as credit offers them resources to improve quality of life by buying homes, purchasing automobiles, funding higher education, and financing everyday needs. However, accumulating debt may have negative impacts on their financial satisfaction. Since the 2021 wave of the National Financial Capability Study (NFCS) was collected during the COVID-19 Pandemic, this study was able to look at how financial stressors (e.g., unexpected income drops, being laid-off, difficulty paying on-going bills), financial anxiety, and financial literacy variables (e.g., subjective financial knowledge, objective financial knowledge, perceived financial capability) during COVID were associated with debt holdings and financial satisfaction. This study further investigated how holding different debt types was associated with financial satisfaction and how these associations vary across three age groups. Results of the study show that individuals who experienced financial stressors and higher levels of financial anxiety during COVID had higher levels of debt holdings than those who did not have such experiences. In contrast, there was a negative association between financial literacy and debt holdings, suggesting that as objective financial knowledge and perceived financial capability increased, the number of debt types held decreased. Additionally, when considering age differences, individuals in the young (e.g., MZ generation) and middle (e.g., Gen-Xer) age groups reported holding more debt types than those in the older (e.g., Boomer/silent generation) age group. Results of the study also revealed that credit card debt, automobile debt, and medical debt were negatively associated with financial satisfaction, whereas mortgage and student loan debt were positively associated with financial satisfaction. This study further found that, compared to those in the older age group, individuals in the young age group had higher levels of financial satisfaction, while individuals in the middle age group had lower levels of financial satisfaction. Importantly, the findings of this thesis can add to the current literature regarding what role age plays in the type of debt utilized at different periods of the life cycle to inform new financial and debt management programs for financial practitioners aimed at increasing financial satisfaction.