In the 90s, banks and loan companies were giving out credit cards like they were going out of fashion. Banks increased their lending and it seemed anyone could get hold of a loan if they needed it. As a result, we saw a generation of spending in a way we had never seen before. Suddenly, we could have access to thousands of pounds to spend on holidays and shopping – with little thought to the consequences.
This led thousands of people across Britain to find themselves in a large amount of debt that they couldn’t easily get out of. Interest rates made repayments hefty and difficult to meet, and many people took years to pay off sums of debt.
So why is it that the younger generations are not learning from the mistakes of their elders?
In a recent BBC article, we read that young people aged 17 to 24 asked for advice on 102,296 debt issues in the last year; a 21% rise on last year. This is worrying, considering that we know financial problems can lead to stress, anxiety and depression, as well as breakdowns in relationships.
Financial education or literacy didn’t seem to be around for the previous generations who spent money quickly and didn’t always consider the aftermath. Many Brits simply didn’t know how to go about borrowing money responsibly and the system of repayments that would follow.
Now, we have seen many financial institutions bound by legal documentation that states they must provide details of loan repayments in plain English to all loan applicants. We have also witnessed more financial debt charities set up to help those that are struggling to meet debt repayments or have questions about money. So the previous statistic stating that 21% more young people are seeking debt advice could be considered encouraging, highlighting the idea that although younger people may struggle with money, they are indeed addressing the problem and seeking advice to better the situation.
Personal loan provider Wonga commented on this idea of financial literacy in a recent blog post. They said that debt should never be more than 35% of your average incoming salary a month, and that you should always think twice before applying for a loan. One should consider whether the loan is for ‘good’ purposes (i.e. an investment or an asset) rather than a ‘bad’ reason (like a holiday that you don’t really need.)
So whether or not young people will follow in the footsteps of the previous generations of spending is yet to be seen. Of course, consumerism is growing and there’s no doubt that younger generations of people will be spending their money. But it is about how they spend they money, and how they use loans, which is yet to be seen.
If we are to be optimistic, we would hope that younger people understand the value of their hard earned cash, and would seek debt advice and address any financial problems before they escalate further.