Lucy Parsons is Senior Economics Researcher at Reform. The full report “Money’s too tight to mention: will the IPOD generation ever trust financial services?” is available at www.reform.co.uk.
David Cameron and George Osborne have for some time highlighted the problem of debt in this country, both public and personal. Reform’s latest report shows that there are some clear policy ideas to be grasped around financial responsibility. Improving the financial capability of the next generation could help start an era of "living within our means" and assist the economic recovery.
The finances of Britain’s young adults are looking as critical as the Government’s. The “IPOD generation” - Insecure, Pressurised, Over-taxed and Debt-ridden 18-34 year olds – have run up huge credit card bills and smashed their piggy banks. The mean debt among young adults is around £6,000, and 60 per cent have either no savings or less than £1,000 worth.
The credit crunch is adding to the financial pressures. New or soon-to-be graduates are wondering if their student debts were worth it as companies cut back on recruitment. Those already on the housing ladder are struggling to meet repayment increases. First-time buyers can no longer get a mortgage six times their salary at a cheap rate.
One of the key causes is that this is all so new to this generation. Britain’s young have grown up in a time of economic growth, easy credit and high consumer expectations. They lack the instinctive fears of previous generations which come from experiencing double-digit inflation, 30 per cent unemployment levels and food rationing. This far less risk averse generation has been happy to use financial products without fully understanding them – nearly half of young people do not know the rate of interest they are charged on their main credit card or overdraft.
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