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 mired in 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 debt issues that forced young people to turn to the charity for help has soared by more than a fifth in the last year to 102,296.
Official data shows that young people now have an average unsecured debt of £12,215. This is triple the amount before the financial crash, when it stood at £3,988 in 2006.
The majority of the increase in unsecured debt is in the form of loans from bank and payday loan lenders, with the average amount borrowed increasing from £969 to £4,577. Loans obtained from friends and family have also increased from an average of £30 to more than £1000.
Most worrying is the fact that 17-24 year olds 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.
Joanna Elson, chief executive of the Money Advice Trust, the charity that runs National Debtline, warned that there’s a risk that 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.”
Tips for young people dealing with debt
- Work out a basic budget, including rent, gas, electricity, travel and food
- Prioritise the most important bills. The consequences for not paying some debts, like rent or council tax, can be much more serious than for others, so paying these first is important. Once you have done that, you can look at your budget and work out how much can go towards other debts
- Make the most of the offers available to young people. Under 25s can often get discounts on travel and you may not have to pay council tax if you are in full-time education or on an apprenticeship.