The number of complaints about credit cards, loans and debt services has soared in the past five years as underinformed Generation Z-ers take on borrowing they don’t always understand.
A Freedom of Information request revealed that the number of 16 to 24 year olds contacting the Financial Ombudsman Service for help with debt-based financial services products has risen by more than 200 per cent over the past five years.
Complaints about loans were up from less than 950 to more than 2,850 a year since 2016-2017, according to the request made by those representing financial app W1TTY – and contact over credit services, including credit cards, rose by 210 per cent during the same period.
Meanwhile, the number of young people seeking help for debt services – including those related to current accounts, considered one of the most straightforward financial products available to UK consumers – increased a further 205 per cent.
The figures, which follow data from MoneySuperMarket that suggests almost six in every 10 18 to 24 year olds now have a credit card, are the latest to point to a growing trend in the number of young people struggling to manage debt and the financial products behind them.
“Younger people are overrepresented among the groups experiencing debt, so it’s perhaps not surprising that the level of enquiries to the Ombudsman from this age group has also increased,” says Sue Anderson, of the debt charity StepChange.
The charity’s own figures show one in three adults of any age, around 15 million people, are now struggling to keep up with bills and credit commitments, double the number reported at the start of the pandemic.
“Younger people may experience particular financial pressures compared to other age groups, such as a greater level of financial commitment as a proportion of their income, and a higher prevalence of less secure, lower-paid work,” Anderson adds. “This can make it difficult to resolve financial issues when they arise.
“This means the way that credit is marketed and provided to younger people needs to be above reproach – paying particular attention to affordability, and ensuring that communication is clear and straightforward, especially for an age group that will have had less experience of dealing with credit in the past.”
A recent poll of 4,000 adults, by think tank the Centre for Social Justice and debt collection firm Lowell, found that half of those with direct experience of financial problems blame low money management skills for their issues, rising to more than two-thirds of young adults.
“The finding that just under a half of all adults need urgent help in managing their own money reflects the sorry state of personal finance education in the UK,” says Stewart Perry, head of responsible business at wealth manager Quilter.
“The consequences of poor money management can be devastating, and include problem debt that can be a struggle to get out of. Shockingly, two-thirds of young people said lack of money management skills drove them into debt. Debt is not inherently bad, but used poorly it can destroy someone’s personal finances in just a matter of months.”
While the government’s new Breathing Space scheme will provide a lifeline for those struggling with problem debt, it will not adequately tackle the symptoms of the problem, including the key issue of poor financial education, which starts at a very early age.
Various studies have found that financial attitudes, like so many others, are shaped around the age of seven.
“Some children will pick up positive habits from their parents like effective budgeting, responsible borrowing and long-term saving, but many won’t” says Perry. “We need to ensure all children get a grasp on the basics of financial prudence in primary schools.”
One report released by the Centre for Financial Capability – a charity funded by a group of 20 financial services firms, tasked with providing primary school-aged children with financial education – showed that, following financial lessons, two out of three primary-aged children were actively working towards a saving goal, more than double the national average.
At the same time, more than 75 per cent of the children who received the lessons delivered by the charity MyBnk were able to delay spending. The results may not have been a particular surprise to the children, though, with more than three-quarters believing that “financial education will help them when they are older”.
Last summer the centre began lobbying the government for high-quality, effective financial education for every primary-aged child by 2030.
“The government could look to support mandatory financial education in primary schools, funded by the expansion in the Dormant Assets Scheme expected later this year,” Perry suggests.
“While we’ll have to wait for a consultation to decide where the new money raised is eventually spent, financial education for young people seems like a natural choice.”