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Action for Children respond to our Personal Debt Statistics Yearbook

Our recently published Statistics Yearbook 2014 paints a picture of personal debt in the UK, and has prompted a response from a number of our charity partners. Here Shelley Hopkinson, campaigns and public affairs manager at Action for Children gives her take on our latest findings.

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“StepChange Debt Charity’s Statistics Yearbook 2014 has revealed that young people under 25 are one of the worst affected groups when it comes to debt, reporting that the number of people they have advised under 25 has risen from 11.3% in 2012 to 13% in 2014.

“Action for Children knows from conversations with young people at our services, and the practitioners who support them, that many vulnerable young people are accessing high interest loans and getting into debt. This can include young people who have been in care and are forced to live independently too quickly, or young parents.

“Our latest report 'Paying the Price', found that 42% of Action for Children’s frontline staff know young people aged 16 to 25 who are accessing high interest credit, cash or goods such as payday loans – that’s around 3,500 vulnerable young people.

“Worryingly, some of these young people we spoke to were unaware of the dangers associated with high interest loans. Not enough is being done to make sure young people understand the small print of these offers and the consequences of taking our high interest loans. Some of the young people we spoke to said they feel targeted by doorstep lenders in their community.

“We asked our practitioners to estimate how much their young service users owe. The majority reported over £1,001.Young people borrow money for a range of reasons, from buying or replacing household goods or setting up home. The most common reason was to pay for special occasions like Christmas or birthdays –13 per cent of our managers reported instances of this. This was especially important for the young parents we spoke to.

“I get so stressed in the lead up to Christmas but you’ve got to keep Father Christmas alive for the little ones” - Young parent

“StepChange Debt Charity’s Yearbook reported that younger age groups are far more likely to owe money on payday loans compared to those aged 60 or over. Action for Children’s research also found that payday loans and high street lenders are popular choices for vulnerable young people. But it is concerning that young people may not understand the risks involved and instead see it a quick and easy solution. It is not being made clear enough to lots of young people what they’re entering into when they sign up to high interest loans and products. The most vulnerable young people often don’t have the support networks to help them make positive financial decisions

“Problem debt is becoming a common experience for too many young people. We are concerned that this may be being made worse as some young people are not receiving the financial education they need.

“Action for Children surveyed over 1000 children and young people aged 12 to 18 across the UK, as part of our research for 'Paying the Price'. The survey found that 45% could not confirm that they had been financially educated.

“Of the young people who had received financial education, 87% learned from parents or carers and only 27% learned about money at school. But sadly, for some children and young people, school and home are not positive places to learn. The young people we work with in some of the most disadvantaged communities may have difficult relationships with family or may not be engaged in education or training.

“As well as understanding financial products, there are practical barriers between young people and mainstream banking. For example, being unable to prove identity or address with documents like a passport or utility bills is a particular problem for young people who have been in care or the criminal justice system. Practical barriers like these are exacerbated by young people feeling intimidated and assuming that they are unwelcome in banks.

The situation is concerning given the serious long-term consequences caused by problem debt and financial exclusion. It can stop young people, who are already facing extra challenges in their lives, from achieving their potential. Evidence shows that young people who experience financial problems are more likely to take risks, be unsafe or become homeless. Financial problems can also affect young people’s mental health and employment prospects.

“There is clearly a strong case for improving financial education for the most vulnerable young people, reaching out beyond the home and school so that all young people get the help they need.

“National governments must work with professionals, including Action for Children and StepChange Debt Charity, to address the problem and identify solutions. Future financial capability and inclusion strategies should embed an early intervention approach and ensure that support is targeted at those most at risk of debt.”