More than half of Americans under the age of 30 say they have already hit their “financial rock bottom” — due primarily to mental health challenges, job loss and debt as the major causes, according to a new study by the Principal Foundation. 

The research report, “Youth Finances in the U.S.”: Stories of Adversity and Hope,” is based on a survey of 2,400 Americans under age 30, with half of the respondents from low- to middle-income households. The study also included 30 in-depth interviews with young people from across the country. 

Of the respondents, 54% said they have hit financial rock bottom — a situation that one respondent named Jeremy, age 23, characterized as being “stuck in a rut and can’t seem to find yourself out” and having “no options to move forward.” As a group, this demographic faces the second-highest poverty rate in the industrialized world — 18% — the study noted. 

The findings reflect some sobering economic realities for a demographic that is the largest and most diverse generation of Americans. While it’s not surprising that the study found that financial crises are more common among young people who have experienced hardships in their youth — such as parents’ divorce, a serious illness in the family or a job loss — it also found that college graduates and those currently employed were actually more likely to have hit financial rock bottom than lesser-educated or unemployed peers. 

Earlier this week, Principal hosted a roundtable discussion of the results with a selected group of foundation, company and community representatives. The foundation is an independent, not-for-profit organization that receives funding from Principal Financial Group. 

“Young people are experiencing financial crises much more than we would have imagined prior to beginning this research,” said John Mark Feilmeyer, a senior program manager with Principal Foundation. Nearly 1 in 5, or 18%, of respondents said they currently felt they were at “rock bottom.” 

Among the key findings: 

– One of four young people say their debt is overwhelming. Credit card debt, not student loan debt, is the most common source of debt for this group. An emphasis on building a strong credit history, ironically, led many to begin using credit cards. Nearly half of respondents said building a good credit record was more important than building savings. 

– Low- to moderate-income young people are optimistic about their futures, despite the challenges they face. Their top three priorities are paying off debt and being debt-free (56%), putting more money into a savings account (41%), and starting or going back to higher education (31%). 

– Among those who climbed up from financial rock bottom, the three most effective choices that enabled them to do that were: changing their lifestyle (48%), saving more for unexpected expenses (36%), and making a monthly budget (35%). 

Mandi McReynolds, director of the Principal Foundation, said the study fills a research gap about young people between the ages of 15 and 30, particularly filling a need for a study that includes low- to moderate-income people. This study defined low to moderate income as 40% or less of the median income for a respondent’s area of the country. 

The focus groups were brought together to discuss the findings as an effort to challenge common assumptions about young people and their finances, and to explore potential ways to better help this demographic through its grant-making and initiatives. 

“The beauty of the report is that when the Principal Foundation chose to do this research project, we really wanted to make it open to the public,” McReynolds said. “So it could be used by a parent, it could be used by someone in the nonprofit space. It could be used by a young person themselves, or it could be used by anyone in the financial service industry to think about what they can do to be a part of the solution.

“The big reason why the foundation funded it was for that idea of public knowledge and dissemination and opportunity to develop action,” she said. “The Principal Foundation will be taking action from it and seeing what we can do, and we hope others will join us in that endeavor.”