Young people in debt worry and are unlikely to seek advice

New research by the National Debtline has found that 37% of 18 to 24 year olds are already in debt, owing an average of nearly £3,000 (excluding student loans and mortgages). Young people are building up debt and worrying about money in their first few years of adult life, but far too few are seeking advice when they fall behind.

The charity’s new report, Borrowed Years, reveals that 18 to 24 year olds are building up significant debts at a relatively early age and suffering widespread money worries, despite most trying to budget and actively manage their personal finances. 

A survey of 2,042 18 to 24 year olds, conducted for the Money Advice Trust by YouGov, found that 37 percent are already in debt, owing an average of £2,989 (excluding student loans and mortgages) – with 51 percent of adults under 25 reporting that they regularly worry about money and 21 percent losing sleep as a result.

 National Debtline is warning that too few under 25s are seeking free advice from debt charities when they fall into difficulty.

 The report found that credit cards, overdrafts and loans from family and friends all feature strongly in 18 to 24 year olds’ borrowing habits. Other findings included:

•  37 percent currently hold one or more credit card, an overdraft or other form of borrowing (excluding student loans and mortgages), owing an average of £2,989. This includes 16 percent with one or more credit cards (average debt £856), 15 percent with an overdraft (averaging £1,180 overdrawn) and 12 percent in debt to family or friends (owing an average of £4,644).
• Women aged 18 to 24 who have credit cards tend to owe more than their male peers (on average holding £926 in credit card debt, compared to £790 for men), while men tend to have bigger overdrafts (£1,436 on average, compared to £941 for women).
• Taking student loans and the small number in this age group with mortgages into account, more than two thirds (67 percent) of 18 to 24 year olds have some form of borrowing, with the average student loan balance standing at £25,505.

The research reveals widespread money worries amongst 18 to 24 year olds, with many young people paying a high human cost as a result.

•  Around half of 18 to 24 year olds (51 percent) say they regularly worry about money, while one in five (21 percent) sometimes cannot sleep as a result.
• Around a third (32 percent) feel their debts are a “heavy burden”.
• Women were found to be significantly more likely to worry about money than men (57 percent of women, compared to 45 percent of men) and to lose sleep as a result (24 percent of women, compared  to 18 percent of men).

Despite these struggles, the research found clear evidence that the majority of young people are striving to actively manage their personal finances.

•  More than two thirds (69 percent) of 18 to 24 year olds have set a budget that they try to stick to, and 71 percent log into online banking to check their account at least once a week.
• ]When it comes to borrowing, however, only 27 percent know what their credit rating is and how it affects them, and 37 percent of those in debt say they do not have a plan in place to repay the money that they currently owe.
• 42 percent say they have found managing their money harder than they expected

 The findings have reinforced concerns that too few young people are seeking expert advice on managing debt and borrowing.  In 2015 just 12 percent of callers to National Debtline were aged 18 to 24 – despite research from the Money Advice Service showing that this age group accounts for 21 percent of the UK’s over-indebted population.

Across all 18 to 24 year olds, while 63 percent have turned to a parent for advice about money at some point in the past, just two percent had sought expert advice from a money or debt advice charity.

 In its Borrowed Years report published today Money Advice Trust has pointed to a series of measures that could help under 25s to manage their money and avoid financial difficulty, including earlier and more co-ordinated financial education, timely support for first-time borrowers, a larger role for employers in supporting young workers’ money management and practical reforms to student finance payments.

 

Joanna Elson OBE, chief executive of the Money Advice Trust said “With many young people beginning to build up debts soon after they turn 18, we have a real battle on our hands as a society to make sure they receive the support they need.  This is particularly important given the widespread worry that money issues are causing to under 25s.“This support should range from ensuring they are provided with basic financial skills, timely support when they first apply for credit and practical reforms to student finance payments to help those at university to manage their money well. “Worryingly, far too few under 25s are seeking advice when they fall into difficulty.  If we let this situation continue, there is a real risk that young debts will become old debts, with the financial prospects and life chances of young adults being negatively affected as a result.

Sheila Wheeler, Director of Debt Advice for the Money Advice Service said c “It is great to see that young people have good money management skills, however we are concerned to see that they are still building up significant debts which could have big impact on their financial futures. Our own research has found that only one in ten young adults (aged 16-24) who are over indebted are seeking advice. Young people have a range of financial challenges to face from funding university or college courses to low incomes and high rents. We understand how hard it can be to manage and we want to call on anyone who is feeling the financial strain to seek free advice as soon as possible. The Debt Advice Locator Tool will help you find free, high quality help in your area.”