Debt amongst young people in Scotland is at an all-time high.
There is a new generation who have access to credit and are finding themselves with debt they can’t afford.
There are an estimated 60 million credit cards in circulation in the UK, with an estimated two thirds of UK adults having at least one.
Almost half get their first credit card between the ages of 18 and 24.
More than half of 18- to 24-year-olds in the UK have fallen into debt in the past 12 months or expect to do so in the next 12 months, and 81% of young people in the UK feel anxious about money.
When looking for the root cause of this, there could be a few options.
Low Income and a Poor Economy
In Scotland, the National Living wage for someone over the age of 23 is £10.42 an hour. However, basic minimum wage for 18–20-year-olds is £7.49 and for 21–22-year-olds it’s £10.18.
This means that for someone between the ages of 18 and 20, a full-time wage would be £1,175 a month after tax compared with someone over the age of 23 who would earn £1,503 a month after tax.
45% of jobs in the UK that pay minimum wage or below are within retail, hospitality, cleaning, or maintenance occupations.
16-24-year-olds make up just 10% of the total workforce, but they make up around half of workers in hospitality roles.
This means that there’s no surprise that almost half of young people are unable or just about managing to make ends meet each month.
It’s worth noting that Generation Z have about 86% less buying power than Baby Boomers did at the same age.
This means that young people do not have the same access to financial security that previous generations had. In fact, just 41% of young people believe others like them will ever be able to buy their own home, and only 51% think they will ever earn enough to support a family.
Poor Financial Education
Poor financial decisions may be able to be put down to a lack of financial education.
How to have healthy finances is something that is rarely taught at school, meaning that there are thousands of graduates each year that are plunged into a world of easy credit without the knowledge to understand the consequences of using it.
There is also a worrying trend of young people’s reliance on Buy Now Pay Later services.
Nearly a third of 18-34-year-olds don’t realise that they can get into debt using Buy Now Pay Later services.
To add to this, 53% of 18-24 year old’s have either accidentally or intentionally missed a credit card payment in the last two years.
Poor Money Management
Lowell, a company who purchases debts from other lender, have found that 68% of young people in the UK reported that a lack of money management skills was a key factor in driving them into debt.
Interestingly, 46% of 16-34-year-olds are in debt due to purchasing luxury items.
With 62% of 16–32-year-olds having spent money on them in the last six months, luxury items are a large factor when discussing poor money management.
Luxurious purchases can be dangerous if a person does not have the means to foot the bill.
They are difficult to resell and a large majority of them immediately lose value, making them poor investments.
A continuous change in trends means that many are turning to credit to keep up with their shopping habits.
More than one in five young people are taking out credit or using Buy Now Pay Later schemes on a monthly basis to buy designer gear, with over 10% in more than £1,000 worth of debt on the platforms.
It’s worth noting that there are two sides to this point.
Yes, there is an element of poor money management or poor financial education. However, Generation Z already have the odds of financial health against them.
This, for some, results in further poor financial decisions as they believe it will make no difference.
To add to this, the chances of a young person being able to get on the property ladder without significant financial support is very slim, therefore they do not have a pressing reason to save their money.
Debt Help Available
For those who have found themselves with unaffordable debt, there are solutions that can help.
Here at Trust Deed Scotland® we provide advice on all formal debt solutions that are available in Scotland.
Our experienced debt advisers will be able to discuss your situation and provide you with information on all of the solutions that would suit your individual circumstances so that you can make an informed decision on what is right for you.
A Trust Deed is an example of one of the solutions that we offer.
A Trust Deed provides legal protection from the people that you owe money to, while freezing interest and charges. It allows you to consolidate all of your debt repayments into just one affordable payment for a period of four years. At the end of the 48-month term, the remainder of the debt is legally written off.
Another example of a debt solution that we offer is the Debt Arrangement Scheme (DAS). The DAS, like a Trust Deed, allows you to consolidate your debt into one affordable monthly payment while freezing interest and charges. The difference is that you would pay that affordable payment until the full debt amount is paid.
If you think that a debt solution may be the right option for you, you can try either our WhatsApp debt advice service or Livechat debt advice services, or quickly check your options using our Trust Deed Wizard tool. Call us on 0141 221 0999.