Debt Row Reality for Millennials
As we look forward to Christmas, new research has revealed how a generation has become reliant on high-cost borrowing for basics like food and rent. Chris Kay looks at the dangers facing ‘Millennial’ borrowers.
Christmas is a time when we all over-indulge, including financially, and many of us have faced that sinking feeling in January when we have to face up to December’s excesses.
However, that January feeling has become an all year-round sensation for some. Did you know that four in ten adults in Britain say they are not in control of their personal finances?
According to the Money Advice Service, approximately 8.2 million UK adults suffer financial worries, with younger adults – the ‘Millennial’ generation – noticeably more at risk.
It seems that those born after 1982, are twice as likely to take out high-cost payday loans than the generation before them.
On average the post-war “baby boomer” generation have taken out four payday loans each while Millennials have taken more than seven.
This means that Millennials – who will make up 50 per cent of the workforce by 2020 – are more likely to have poor credit records, due to not having a track record of payments and because using payday loans has a detrimental effect on their scoring. In turn this could deny them the opportunity to access cheaper forms of finance in the future.
Recent studies by the charity Toynbee Hall and employee loan firm Salary Finance, revealed that Millennials are normalising payday loans or credit cards as a form of topping up their income, even though it’s much more expensive than mainstream finance like a personal loan or an overdraft.
The comparison site TotallyMoney.com claimed that a staggering one in four of those under the age of 25 borrow to pay their utility bills, while 16 per cent resort to their credit card to pay rent. Meanwhile, around 52 per cent of under-25s use their plastic to pay for groceries and 60 per cent don’t pay off their bill every month.
This financial insecurity and over-reliance on credit cards or payday loans as a necessity to survive is a frightening concept. In the words of Credit Unions of Wales recent campaign, this is a generation that very much faces the prospect of a lifetime on debt row.
This comes at a time when personal debt in Britain has topped £180bn, more than the annual budget for the NHS.
Teaching financial responsibility in younger life is essential to breaking the debt cycle and helping the next generation to a more secure fiscal future.
Chris Kay is CEO at Cambrian Credit Union, formerly North Wales Credit Union, which is a community based, financial services co-operative. Cambrian Credit Union Limited is a member of the Government-backed Financial Services Compensation Scheme, protecting individual deposits up to £75,000.