What are millennials' real attitudes toward debt?

By Marianne Curphey

Young people growing up in Britain today have been characterised as the #YOLO generation -- for those not familiar with Twitter-speak, that stands for "You Only Live Once". The phrase is the new carpe diem, and it's a simple way of saying, "enjoy live to the fullest, even if it means taking a risk."

According to some reports, this attitude toward life also applies to attitudes of millennials -- the 18-to-34 group -- toward earning, spending and saving. For instance, a 2015 report from the Institute for Fiscal Studies (IFS) found that young people are on course to have less wealth at each point in life than earlier generations did at the same age. However, figures from debt advice charity StepChange, show that of all the age groups, 18- to 24-year-olds have the lowest amount of outstanding debt. gen-y-debt

So why the conflicting numbers, and what is the real millennial attitude toward debt?

Better debt management, or less vulnerable?
A StepChange spokesman says millennials' low debt levels might be partly because young people have less access to credit since they tend to earn less and have had less time to access it, as they turned 18 more recently.

Another part of it, the spokesman says, is that often, people don't get into debt simply because they can't manage their money. "Often the reason is because of shocks to their income, for example relationship breakdown, illness, reduced hours or job loss," he says. Then, with no savings or not enough savings to cushion the blow, they turn to credit or other loans.

Under-25s are likely to be in less secure jobs, or even perhaps on zero hours contracts, and they often don't have some of the large outgoings and responsibilities that older people with families might have. Therefore, they are less susceptible to such problems, as they already don't rely on a steady income, the spokesman said.

"We find that many people in this age group are already servicing debt which they can cope with if they receive the income they expect," the StepChange spokesman said.

More millennials seeking debt help
That's not to say, of course, that young adults do not have debt. The same reasons that they are not as susceptible to falling into sudden debt -- unstable jobs or zero hours contracts -- can lead to more reliance on credit cards.

"One week they might have 30 hours of work, but the next week they are only give five hours," the StepChange spokesman says. "They turn to credit cards and other loans to fill the gap between the income that they need to pay the bills, and the actual pay they receive."

Another common problem this age group tends to face is adding an authorised user to their credit card accounts, then being stuck with someone else's debt.  Though this problem isn't limited to millennials, their relative inexperience with credit and being susceptible to pressure from friends or partners makes them more likely to get in this situation.

However, it seems that those that do have debt are proactive in repaying it.

StepChange's statistics show that the number of under-25s who are seeking help with debt counselling has been rising over the past few years. In 2011, the under-25s made up 9.8% of all those who contacted the charity. In 2015, the figure had risen to 13.6%, compared to other age groups where the percentage had stayed relatively stable, or in the case of the over-40 group, had actually fallen.

However, Dennis Hussey, a money adviser with the charity National Debtline, says younger people are not as adept at spotting the signs that their debt is getting out of control.

"The older callers we talk to tend to approach us earlier in the process," Hussey says. "They are better at spotting a pattern and realising that their debt is getting out of control and may call before things are too serious."

Less #YOLO, more #JOMO
Lily Lapenna is co-chair of the UK-based charity MyBnk, which specialises in financial education and enterprise. She's 36 and considers herself a millennial.

However, instead of describing her generation as the #YOLO generation, she says young adults are embracing #JOMO, which, according to Lapenna and Twitter, stands for Joy of Missing Out (sibling to #FOMO, Fear of Missing Out). 

"We are the generation who are earning less than our parents and we need to embrace and deal with that," Lapenna says. "It has created a generation that is more resilient and more creative about where their income comes from, but also aware that they won't have the same options as their parents did."

As a consequence, she thinks the attitude to loans and credit card debt has changed over the past five years.

"People take debt much more seriously than they used to," Lapenna says.

See related: Which should you choose: Student debit or credit account?, How to make your adult children financially independent

Published: 29 April 2016