Young people at most risk of suffocating debt
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When it comes to debt, it seems the younger generation are more at risk of the most suffocating of debts – according to a recent survey.
In a recent BBC article, we saw findings from a Citizens Advice survey on money being discussed. It said people aged 17 to 24 asked for advice on 102,296 debt issues in the last year, which was a 21% rise on the previous year.
Why is this worrying? Well, it is never good to hear that people are struggling with money, not least the younger generation who will act as parents of the next generations. Bad money handling and management now could have a knock on effect on our children and our children’s children. It is also a high contributing factor to stress, depression and anxiety. With this in mind, we need to be careful about how we educate younger people on how to be financially savvy.
The one main fault of young people in this study appeared to be debt carried on credit cards. When it came to credit card debt and other loans, the average debt among this age group rose from £969 to £4,577 between 2006 and 2012.
To top things off, debt was the equivalent of 70% of income among 17 to 24-year-olds in 2012. To put this into context, payday loan provider Wonga.com said in their recent survey that debt should never be more than 35% of your average incoming salary a month.
Wonga suggests that anyone of any age should be careful about taking out a loan if the reasons behind the loan could be considered ‘bad.’ For example, a loan to go on holiday, or a loan to buy some Christmas presents, may not be a good use of the credit with the repayment charges that it carries. For purchases such as these, Wonga suggests the fallback of savings – where £1000 would be considered a good amount to have saved away. There are situations, however, when a person may apply for credit for ‘good’ reasons; this could include to cover an educational fee or to help buy an asset. This sort of purchase would ‘pay off’ in the long run as you receive a lot more out of it.
Young people should be particularly careful with their money, because if they are reckless, this could cause serious difficulties in later life. In fact, the burden of the debt could last for many years and even decades if not handled properly.
A financial ‘MOT’ could be a good way to keep a check on money matters. By looking regularly at how much money you have coming in, going out, what you would like to save up for and what credit you could need, you’ll be able to stay on top of things. Adopting this attitude throughout your life from an early age is a great way to be financially responsible.
Category: Student News
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