Young people save and shun credit
Filed under: Savings & ISAs
Youngsters are saving more than most to avoid falling into debt in the face of the financial crisis according to latest research.
Mintel has found that overall one in five (20%) Brits has increased the amount they save while shunning offers of credit, fearing they will end up saddled with debt. This rises to as many as 35% of those aged between 18 and 24.
Need to know: Savings
Reducing exposure to creditMintel's says that today, as many as 70% of UK consumers say that since the economic downturn they are trying not to borrow or use credit, while 41% have actively taken steps to reduce their exposure to credit - rising to as many as 51% of those aged between 35 and 44.
In addition, three quarters (76%) of Brits say that they are keeping a closer eye on their finances showing just how many of today's consumers want to be seen as prudent and financially savvy.
The majority of Brits see themselves as responsible users of credit - with 68% claiming to use credit in this way.
Stigma of debtDeborah Osguthorpe, head of UK financial services research said: "This latest research highlights a significant shift in the nation's attitude towards credit - and a shift in generational attitudes.
"While previous years saw credit easy to come by with less stigma attached to borrowing - growing up in a legacy of economic crisis has forced a new generation to reassess and reevaluate their attitude towards debt. Both consumers and banks are repairing their own balance sheets and returning to traditional values."
Age of reasonOsguthorpe identifies age differences. She says: "Although older consumers remain the most credit averse, there are indications that younger consumers are trying to increase their level of savings as a consequence of the recent economic challenges.
"As younger adults are faced with high unemployment, higher levels of student debt and the demand for large home deposits, they are being encouraged (or forced) to take a more disciplined approach to their finances.
"This could result in a generation who are more cautious about taking on additional debt, and who are more willing to save than to rely on credit."
Widespread borrowingWhile Brits are taking a more cautious approach to debt, credit ownership in Britain is widespread. As many as seven in ten (70%) of the online population owe money on at least one form of credit.
More than three fifths (62%) owe money on unsecured products such as credit cards, overdrafts and personal loans, and three in ten (30%) have some form of secured credit such as a mortgage.
Osguthorpe reckons aversion to credit will last some time. She says: "After experiencing economic hardship for the last three years, and with little sign of any improvement on the horizon, it's probably fair to say that it will be a long time before most consumers will return to a more relaxed attitude towards credit.
"There is even some evidence that the current era of austerity could bring about a more fundamental change in the way people approach their finances. Although it is difficult to gauge to what extent this behaviour will become a permanent feature, it is very likely that a good proportion of these consumers will want to retain a sense of control over their finances."
Overall, Credit Cards are the most common type of unsecured debt held - with 43% of Brits having one. Mortgage (29%), Current Account Overdraft Facility (24%), Store Card (11%) and Unsecured Personal Loan (11%) make up the remaining top five.