The causes and consequences of getting into debt are different, but debt problems can be prevented by directing early help and support to children, young people and their parents.
The worrisome trend in Finnish household indebtedness will continue from 2019. Intrum analyzes the debt development of Finns over the last four years (2019-2022). Last year’s results showed that economic inequality increased during the pandemic, and the situation has not improved. In 2022, the share of heavily indebted persons in debt collection orders increased by 17.6% compared to 2019.
Changes in the share of heavily indebted persons by age group. Among young adults, the proportion of heavily indebted people has increased compared to both the same age group and all age groups. In 2019, 9% of the young adults targeted for debt collection were heavily in debt, while in 2022 the number rose to 22%. 34% of all age groups were classified as heavily indebted.
The number of debt collection orders and related debt amounts have also increased, especially in the 18-24 age group. Debts are mainly initial purchases made by young people, such as telephone and telecommunication services, electricity, healthcare and the financial sector. This suggests that the income of young adults is not enough to cover all daily expenses and purchases are financed with credit, which for one reason or another cannot be repaid as planned.
“Taking a loan in itself is not inherently wrong. It enables many things, such as education or the purchase of an apartment. However, it is only worth taking a loan when you know you will be able to repay it. Young people may be too optimistic about their ability to repay and may not understand that repayment of loans is manageable, even as their financial situation deteriorates. They may also fail to take a critical look at their spending habits,” says Reetta LehessaariDirector of collection services at Intrum.
Minna MarkkanenThe director of the guarantee foundation emphasizes a deeper examination of the reasons for young adults’ indebtedness, taking into account their different backgrounds and life situations.
“We also need a better understanding of the many factors behind debt problems, such as the life situations of young people, intergenerational poverty, coping with scarcity, the social pressures caused by our consumer culture, and the effects of inflation,” says Markkanen.
The burden of heavily indebted persons continues to grow, which requires attention to financial literacy and addressing the root causes of over-indebtedness.
Although the growth of highly indebted persons slowed down a bit in 2021, it returned to the rise last year. Despite this, the increase in the share of heavily indebted persons out of all debtors has continued since 2019. The growth has been particularly significant in the 18-24 and over 80 age groups. the total number of debtors has decreased between 2019 and 2022, which means that the plight of financially vulnerable debtors will deepen, making it even more difficult to get out of debt.
“The development is worrisome. Debt is accumulating for people who are already in debt, as well as for young adults and the elderly in a financially weak position. The effects of inflation and rising interest rates may not have been sufficiently taken into account in personal financial planning, lead
increased debt burden. In addition, the COVID-19 pandemic has worsened the situation for many people, especially young adults, who have lost jobs, reduced incomes and increased economic instability.
Experts emphasize the importance of early intervention and support to tackle the growing debt problem among young adults. They argue that efforts should be made to provide financial education and guidance to children, young people and their parents. By promoting financial literacy and responsible financial habits from an early age, it is hoped that young adults will better understand their finances and make informed decisions about borrowing and spending.
In addition, it is necessary to take a comprehensive look at the reasons behind the indebtedness of young adults. Factors such as intergenerational poverty, survival of scarcity, social pressures related to consumerism and the effects of inflation must be taken into account. This deeper understanding allows for the development of targeted interventions and support programs that address the root causes of young adults’ over-indebtedness.
In addition to training initiatives, it is important to think about responsible lending practices and measures that promote consumer protection. Financial institutions should ensure that young adults receive clear and transparent information about loans and credit products, including interest rates, repayment terms and potential risks. Enforcing stricter regulations for vulnerable populations, such as young adults with limited financial resources, could help prevent excessive borrowing and reduce the risk of falling into debt.
The government and relevant stakeholders should work together to create a comprehensive approach to solve the problem. This approach may include a combination of financial education programs, targeted support services, consumer protection measures, and policies aimed at reducing income and economic inequality. With a versatile strategy, it is possible to curb the debt level of young adults and secure their long-term financial well-being.
In summary, it can be stated that the increasing debt problems of young adults, especially in the 18-24 age group, require urgent action. Early intervention, financial education and support are critical to equipping young adults with the necessary knowledge and skills to manage their finances responsibly. In addition, a comprehensive investigation of the underlying causes and the implementation of measures to promote responsible lending and consumer protection are vital to prevent financial problems among young adults. With cooperation, it is possible to deal with this urgent issue and promote a financially sustainable future for young adults in Finland.
Source: The Nordic Page