Financial stress among European consumers is rising with almost half (45%) say their bills are rising at a faster rate than their income, thus negatively affecting their general wellbeing according to Intrum’s latest edition of its European Consumer Payment Report.
The report says that borrowing culture is on the rise. An increasing number (24%) have borrowed money or reached their credit card limit in order to pay bills. This applies especially the young Europeans where 31% state the same. As financial challenges mount, consumers are struggling to save for their long-term financial security. 36% of consumers say they will have difficulties to afford a comfortable retirement.
European consumer are over-estimating their financial literacy. Today 69% believe their financial education has been sufficient. Yet, when tested 37% failed to match basic financial terms to their correct definitions. Moreover, 50% failed within the age bracket 18-21.
The results in the report show that bills are continuing to outpace the general income, increasing financial stress among consumers. In households with children (parents), 48% are uttering the same concerns.
Although the majority (75%) of European consumers are still managing to save part of their salary every month, more than half (52%) are dissatisfied with the amount they are able to save. Only 30% cite saving for retirement as a key motivation, and two-fifth (36%) think they will afford a comfortable retirement based on their ability to save long-term.
European consumers are becoming increasingly reliant on credit to fund their living expenses. This culture is fueled by social media pressure, increased accessibility to fast credit and online shopping. About half (51%) of the surveyed 18-21-year-olds claim social media puts pressure on them to consume more than they should.
Mikael Ericson, President & CEO of Intrum said “The European consumers are facing difficulties to navigate in an increasingly uncertain world. Our findings show that a borrowing culture is on the rise, as more consumers are now struggling to keep up with the rising cost of living. As financial challenges mount in Europe, basic financial literacy among consumers keep on declining, especially among the younger population. The findings clearly show that we need to continue to work for a sound economy for consumers.”
A new element in the European Consumer Payment Report 2019 is the Financial Wellbeing Barometer. The Barometer provides additional means to track and compare consumers financial security to meet everyday spending needs and control of their finances across 24 European markets.
The Barometer presents an overall financial wellbeing score for each country – an aggregate score combining scores across all four pillars. Germany, Austria and Sweden rank on top. Greece, Lithuania and Poland at bottom. Key takeaways for the 2019 are:
- Ability to pay bills on time
- German consumers’ confidence in paying bills on time
- Healthy disposable incomes in the Nordics
- Challenging financial picture in Greece
- Credit freedom
- Borrowing habits in countries with high debt-to-income ratio
- Rising borrowing culture in Central and Eastern Europe
- Saving for the future
- Long-term saving for highest-ranking countries (Sweden, Switzerland and Germany)
- Stronger levels of financial education in highest-ranking countries
- Lowest ranking countries display different saving habits (Greece, Romania and Latvia)
- Financial literacy
- Correlation between financial literacy and saving for the future (Finland occupying 1st position)
- Broad range of educational sources among countries who rank high (UK and Irish consumers are more likely to seek advice from independent financial)