Debt 'soars as the young become increasingly financially illiterate'
Published On 2 April 2007
New research suggests that personal debt in the UK is increasing rapidly and that more and more people are likely to have to take on debt consolidation loans or seek IVAs in the future.Figures published by Credit Action show that personal debt in the UK reached £1,310 billion by the end of February. This represents an increase of 10.5 per cent compared to 12 months ago. In total, there is £116 billion more personal debt now than a year ago.
And the problem looks like it is getting worse. According to the charity's figures, consumer debt is increasing at a rate of £318 million per day. Typically, 300 people in the UK have to seek and an IVA or declare themselves bankrupt every single day.
Citizens Advice also reports that people are becoming increasingly worried about their personal debt problems. The charity says that it deals with 5,300 debt problems each day.
Worryingly, new research from the Department of Education and Skills (DfES) indicates that problems to do with debt are going to be even more severe for the current generation of teenagers.
According to the figures, today's young people are disturbingly financially illiterate. A quarter of the 16 to 21-year-olds questioned believed that store cards offered better value than credit cards.
Similarly, 40 per cent of the young generation did not understand what APR meant.
Parents are becoming increasingly concerned that their own children do not possess the financial vocabulary to stop them getting into trouble - 83 per cent of parents said they worried that their children will run up significant debt in the near future.
Despite the concern, 30 per cent of parents say that they never discuss debt or credit at home with their children. Over a fifth (22 per cent) said that this was because their children were not interested in financial matters and 48 per cent did not want to "appear like a nag".
"Sadly in the UK, money is often a taboo subject, which adds to the huge problem of financial illiteracy in the UK. It's time all parents and students started talking, considering their cash, understanding how the system actually works and discussing how to live within a budget," said Martin Lewis, creator of moneysavingexpert.com.
"Do that and there is no one who should be put off entering higher education because of worries about student debt."
Bill Rammell, the minister for higher education, also recently expressed his views on the issue of teenage debt, saying: "While parents are happy to talk with their offspring about socialising, boyfriends and girlfriends or getting a job, it would appear that in many families money remains the last taboo subject.
"We are encouraging parents and their children to sit down and talk about money together."
Recently, charities have also been urging people to be more open about debt problems. The insolvency director at Debt Free Direct, Derek Oakley, said: "One of the things that we really think is needed in order to help people deal with these things [is] to actually start talking about it, to actually start learning about it too, because there's a lot of ignorance about money matters, and a lot of shame."
