It looks like 2022 is going to be a tough year. Omicron seems to be holding back the recovery in sectors like hospitality and travel, and soaring inflation and energy prices are increasing the financial pressures on British households.
It’s quite common for people to experience financial difficulties in times like these. The economic fallout from the pandemic was hard for many but especially rough for younger people. Considering this, it’s no surprise that in the last five years alone, the number of help requests received by the Financial Ombudsman Service (FOS) from 16-24 year-olds has more than trebled.
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What are young people struggling with the most?
After a series of Freedom of Information requests, financial services company W1TTY released data highlighting that young people are struggling to manage their finances. The number of young people seeking help with servicing debt (including current accounts) increased by 205%, rising from 951 in 2016/17 to 2,899 in 2020/21.
Another area that saw a similar increase was complaints filed with the credit services. The number rose by 42% a year or 210% over the five years period. Credit cards and other forms of consumer credit, as well as credit information services, are all within the remit of the credit services, according to the FOS.
The data also indicates that a significant number of Gen Zers enquired about loans. Over the same period, the number increased from 947 in 2016/17 to 2,858 last year – a rise of 213%.
How can young people offset their debt burden?
The data provides valuable insights but also shows a worrying trend that young people are more inclined to turn to loans and credit to ease their financial pressures.
And according to Ammar Kutait, CEO and founder of W1TTY, to avoid “Gen Z’s becoming the generation of debt”, it is paramount for young people to have access to education and support on how to manage their finances.
With this in mind, here are four steps young people can take to address their financial issues.
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1. Speak to debt experts
For those struggling with debt, one of the best places to start is seeking the help of a specialist in the field. Debt experts can provide professional and impartial advice on how to manage your finances. A number of charities, including Citizens Advice, Step Change and National Debtline, offer free advice and a range of services to help people with clearing their debt.
2. Use a balance transfer credit card
According to research by MoneySupermarket, nowadays almost three in five 18-24-year-olds own a credit card. For the fortunate ones, balance transfer cards are a great way to avoid expensive interest payments by grouping everything in one place.
Balance transfer cards work by allowing you to pay off your debt when you transfer everything you owe to a new card. This way, instead of paying interest on several accounts you only worry about one payment, and you may be able to access a significant 0% interest window when you take out the card.
3. Speak to your lender
Ignoring debt is the worst thing you can do. Burying your head in the sand won’t make the debt disappear. Instead, you run the risk of your debt spiralling out of control and ruining your credit score.
It’s always worth speaking to your creditors. You might be able to come to an agreement that includes having more time to pay or reducing your payments. But remember that this is not a guarantee and will depend on your circumstances.
4. Use a money management app to budget
There are tons of apps that can help you with managing your finances more effectively. Some apps use your spending history to calculate what you can save and automatically put it aside.
Others round up your purchases to the nearest pound and save the difference in a savings pot. For more adventurous savers, there are even apps that help with setting financial challenges over a set period.
What they all do is help to build a consistent habit of putting money aside without you worrying about it.
