David Kingman reports on the findings of some new research which shows that young people have seen their personal finances deteriorate much more sharply than older people during the recession
Young people have seen much bigger increases in their level of personal debt than older generations since the beginning of the recession, according to new research from the think tank Demos. This was the key finding of a survey which asked a representative sample of members of the public to work out how their levels of personal debt have changed over the last five years.
Precarious finances
The survey, which analysed data from 1,775 British adults, found that 55% of those aged 18 to 24, and 48% of those aged 25 to 34, said their debts had increased since the beginning of the recession, compared to just 13% of respondents aged 65 and over. At the same time, nearly a third of the over-65s (32%) said that their level of personal debt had actually fallen since 2008, while this was the case for just 12% of those aged 18 to 24.
The report looked at people’s credit card debt, outstanding rent arrears and any other bills they have, as well as asking respondents to add up the sum total of their bank, student and payday loans. Housing debt (in the form of mortgages) was not included in this study.
Among those aged 18 to 24, 45% had debts of more than £2,000 and 19% owed more than £10,000. For those aged 25 to 34, the figures were 56% and 22% respectively.
One of the most concerning things this research revealed was that many young people appear to be taking on higher personal debts in order to pay for necessities. Almost a third – 27% and 28% respectively – of these two age groups said that they had originally taken on at least part of their debt in order to pay for basics, while 35% of respondents aged 25 to 34 had needed to take on debt to pay for unexpected expenses.
This paints a worrying picture of a generation of young adults living with precarious finances, where it takes only a sudden unexpected cost or an increase in the price of basic goods – such as food or energy – to leave them requiring more debt.
Only 30% of respondents aged 18 to 24, and 22% of those aged 24 to 35, said that they had taken on their debt in order to invest in their future, for example by working towards more educational qualifications. Even although this was seen as a “positive” cause of debt by Demos, it is also worth asking whether it is good for Britain in the long term if the price of self-improvement is this high.
All in it together?
Jo Salter, the researcher who conducted this study for Demos, as quoted by The Guardian, asks whether the different generations were really “all in this together” during the recession, as the politicians claim.
“Younger people are facing increasing levels of debt compared with their parents and grandparents. The costs studying for a degree, buying a house and starting a family are higher than ever – and people in their 20s and 30s are increasingly facing a choice between putting their lives on hold, or racking up substantial debts. If we really are all in it together then the government needs to think carefully about not placing additional pressure on people who are just starting out in life, rather than just protecting those who have passed these milestones.”
These findings come hot-on-the-heels of the announcement by the Bank of England in November 2013 that Britain’s personal debt mountain had reached an all-time high of £1.43 trillion. This is clearly a bigger problem for young people than for the old, most of whom have already paid off most of their personal debts – and it means that if interest rates rise, it will be young people, already struggling with precarious finances, who are largely left to pick up the pieces.