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Young debtors

With interest rates on the up, price rises biting, the number of 16-24-year-olds contacting the Financial Ombudsman Service for help with loans, credit cards and debt services has more than trebled since 2016. It is estimated that almost six in ten 18-24-year-olds have a credit card. Should young people be more aware of the debt trap, given how easy it is to borrow?

Young debtors

Young borrowers 

The pandemic caused young people to interrupt their education, disrupt their earnings, lose work experience and career progression. Experts say that 51% of young people (18-24) reported feeling that they have made a poor decision about debt during the pandemic. Of the 12.6 million people who say they have increased their use of Buy Now Pay Later, 25% were aged 18-24 (more women). 

Tips for young debtors 

Unfortunately, the unemployment rate for young people (16-24) was 11.3% in February 2022, compared to the overall 3.8% rate for the UK. Given earnings are under pressure, it’s easier for young people to increase debt levels. If debt is getting out of hand, then:

  • Use a balance transfer credit card to pay interest on one account, knowing that balance transfer cards have low interest rates for a fixed period.
  • Speak to the lender or landlord, as it may be possible to come to an agreement with them to pay off their debts or get more time to work out a solution.
  • Use a money management app to help manage money more effectively. These apps calculate how much money is available to put aside or set up savings challenges.
  • Contact debt experts, as they offer free advice on how to manage their money. Many are charities helping people become debt-free.

When Parents are talking about money with their young adult children, they should share their own financial mistakes. By talking about the debt impact on their life, it will help their older children learn from the parents’ mistakes. The cost-of-living crisis may see young people reluctant to ask friends and family for a loan, as all age groups have less money to spare.

ChildMax pays your take home salary while you’re on 12 months’ unpaid leave, caring for a sick child. It starts from £49.50 or for easy budgeting an initial payment of £8.25 followed by 11 monthly payments of £3.75.

Visit at www.insurewithmax.com  or call the UK call centre 0333 323 0098 for more information.

Sources:

https://www.thisismoney.co.uk/money/cardsloans/article-10414359/How-young-adults-debt.html

https://cybercrew.uk/blog/debt-statistics-uk/

https://themoneycharity.org.uk/money-stats-june-2021-pandemic-heavily-disrupts-young-peoples-financial-lives/

https://researchbriefings.files.parliament.uk/documents/SN05871/SN05871.pdf

 

Date: 16 May 2022 by Max Robinson