The New Financial Crisis
More and more 17-24 year olds are being forced to turn to bank and payday loans as well as borrowing from friends and family.
Today’s 17-24 year olds are facing becoming a generation plauged by debt problems. The charity Citizens Advice warns that unsecured borrowing has exploded among young people and is leaving many trapped in a disastrous debt spiral.
The number of young people to turn to the charity for debt advice has increased by more than a fifth in the past year to 102,296.
Official statics show that the average young person aged 17-24 now has personal unsecured debt of £12,215 — that is triple the amount before the last financial crash. The figure was £3988 in 2006.
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The majority of the increase in unsecured debt is in the form of unsecured loans from banks and payday loan lenders, with the average amount borrowed increasing from £969 to £4,577. There has also been an increase in loans obtained from friends and family, from an average of £30 to a figure now in excess of £1000.
The most worrying statistic is that at an age when they should be enjoying the fruits of their labour, 17-24 year olds now have an average debt to income ratio of nearly 70 per cent, which means they are close to becoming swamped in debt. The ratio is twice as much as that of 25-29 year olds at 34 per cent and almost seven times 60-64 year olds at 11 per cent.
Due to the types of borrowing and the interest rates associated with them, many will find it hard to escape the debt trap.
Financial Health Warning
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, warned that there’s a risk that living in debt becomes the norm for young people.
“The more young people borrow as they set out in adult life, the harder it will be to start saving for the future and afford the homes and lifestyles that they aspire to,” she said. “We need to do more as a society to give all young people the skills and knowledge to manage their money well, and to know where to turn for free advice when they need it.”
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