The types of debt we have largely depends on our age and stage in life.

For most of us, having debt in some form or another is an inescapable fact of life. And despite its reputation, debt is not necessarily a dirty word.

If managed well, it can be a powerful tool to build wealth, and good debts, such as those used to invest in an asset which increases in value – like property or shares – can do just that.

Borrowing to fund a lifestyle you can’t really afford, for big ticket items such as new cars and holidays, is an example of bad debt. It’s not always possible to avoid bad debt, but you should try to minimise it.

Often the types of debt we have at 20 are very different to those we have at 50.

Read on to discover the most common types of debt held by your peers, from the AMP.NATSEM report – Buy Now, Pay Later: Household Debt in Australia,ⁱ and see if your financial circumstances match your debt age.

Starting out – under 30s

Younger people have the highest proportion of student debt as a percentage of their total household debt – at 8.3%.

This is because many students defer the cost of uni fees by accessing the HECS-HELP or FEE-HELP loan schemes, which they only need to begin to repay when their earnings meet the minimum repayment threshold.

This age group also has the highest proportion of personal loan debt – representing 5.4% of their household debt – with these higher interest, short-term loans used to fund purchases such as cars, holidays and other consumer products.

Perhaps surprising is that home loan debt is the largest contributor to household debt in this age group, at 58.3%, signalling that many young people are making it onto the property ladder.

Accumulators – 30 to 50 year olds

Home loans dominate household debt amongst this group, accounting for 62.8%.

Investor debt also begins to increase among accumulators as a way to build wealth through taking out a loan to invest in shares or property, representing 31.7% of all household debt; while student loans, credit cards and personal loans barely rate, all at less than 3%.

Pre-retirees – 50 to 65 year olds

Investor debt (46.3%) overtakes home loan debt (45.9%) as the biggest contributor to household debt in the pre-retiree group, who are paying down their home loans and looking to grow their wealth as they approach retirement, through investments in property or in shares.

Retirees – over 65s

Many retirees own their own home outright, reflected in the fact that home loan debt comprises only 28.2% of total household debt for this age group.

Compared to the other age groups, retirees have had a longer time to pay off their home loans, while some may have also used their super to pay it off completely. But compared to the past, more retirees are carrying more home loan debt over into retirement, with this figure up from 19.6% in 2004.

Investor debt represents 59.7% of household debt for people aged over 65, while retirees are also among the biggest carriers of credit card and personal loan debt, at 5% and 5.1%, respectively, perhaps reflecting their propensity to travel – or a need for additional cash to fund their retirement.

Tools and resources to help you manage your debts

Regardless of what type of debt you have – or its size – managing it effectively is crucial. As a first step, it’s a good idea to have a budget to get a clear picture of your financial situation.

Once your budget is in place, you can consider your financial goals.

If reducing your debts is one of these, we can help you to devise a strategy to keep your repayments on track so you can be debt-free.

© AMP Life Limited.

i http://www.natsem.canberra.edu.au/storage/AMP.NATSEM Report_Buy now pay later_Household debt in Australia_FINAL.pdf