Young, free and in debt

By David Field


Yet again a new survey has come out highlighting the care-free attitude to money of the 'debt generation' and yet again, while sympathy must be given to those people genuinely struggling to get by, it seems clear that some people are their own worst enemies.

On the back of recent studies which have revealed to us that many borrowers already up to their eyeballs in debt are 'financially illiterate', often not understanding the meaning or significance of APR, comes new research which claims that UK consumers are in a “state of denial” when it comes to debt.

While mortgages may indeed be difficult to keep on top of, with all the interest rate rises and switching from one product to another, it is those people with just credit card bills, loans and overdrafts who are the most likely to be spending freely, oblivious to the state of their finances, according to the market analyst Mintel.

With almost half of all adults currently owing lenders money in some form or another, many are grossly underestimating the size of their debts.

On average, while borrowers thought that they owed £5,251, the Bank of England’s estimates puts the true figure at £10,300, meaning that UK consumers have racked up around £100 billion worth of debt between them unawares.

Again, it is hard to sympathise with such a flippant attitude to personal finance.

To be a few hundred pounds out as a result of not taking some small print into account is one thing, but to be anything up to £5,000 off the mark takes some doing, particularly as money experts have put this discrepancy down to a dangerous combination of poor financial management and a tendency to try and ignore money problems.

"Many people know they have a problem but often they're afraid to address it," said Lisa Taylor from the financial information website Moneyfacts.

"The high-spend culture encourages you to live for today and worry about the consequences later.

"Credit cards and loans are easy to get into confusion over because the bills may arrive at different times of the month.

"So collating it all together requires a certain amount of financial discipline which many people sadly do not have," she added.

Sadly, it would also seem that this problem is affecting those people who can least afford to be negligent about their finances.

According to the study, people with a mortgage tend to have a clearer idea about their finances, with homeowners believing that they owed £92,200 while the true figure was really around £95,000, a minimal discrepancy.

It would appear, therefore, that the solution is to instil a sense of financial responsibility into the consumers of tomorrow at an early age, preferably through compulsory education on debt and money matters within schools, something which the government is only just starting to move towards.

Quite how to get rid of the 'high-spend' culture so prevalent throughout the country now is another matter entirely, though, given these latest figures, it seems that many people will have to learn the hard way.