You're under 24 years of age, you focus on enjoying today because tomorrow might never come. You're the average young Australian and you could be the next homeless youth statistic. Well, that’s if you find yourself in a cycle of debt.
The cold reality is that 15-24 year-olds are ranked third out of those currently in debt, according to Dun & Bradstreet, an Australian company that deals in credit reporting, debt collection and sales data.
The statistics don't lie
This year the D&B debt trends report for the March 2008 quarter revealed that:
- More than half of all debtors are younger than 35
- Males have higher average debt amounts than females and are less likely to repay their bills
- Debt stress is most evident in outer metropolitan areas
Dun & Bradstreet's CEO, Christine Christian, puts the state of youth debt down to the current economy. ‘Recent hikes in food, fuel and interest rates have increased the pressure on many individuals by forcing a larger portion of the weekly wage to be spent on essential items,’ she said.
The cycle of debt
The Office of Fair Trading survey of youth debt, undertaken in 2004, revealed some alarming statistics. The survey found that those between 18 and 24, who reported having debt, had an average debt bill of more than $9000 with credit cards ranked as the number one problem, followed by mobile phone and car repayment bills. This amount seems restrained when compared to a survey taken the same year by accountants CPA Australia, which put the average debt at more than $21,000.
According to CPA’s Bendigo spokesman, Peter Mulqueen, who spoke with ABC Online, more than half the young people surveyed said that borrowing was okay to get something they wanted want, even when they’d already had bad experiences with debt. ‘The debt is coming from a lot of things, including HECS [the Higher Education Contribution Scheme] and just a desire to have various goods that people want and I think they don't realise at the start that they've got to pay the money back and they don't really plan.’
At the Australia 2020 Summit, Prime Minister Kevin Rudd, stated an interest in a community volunteer network which could offer university graduates the chance to decrease their HECS debt through volunteer work. But the National Welfare Rights Network—an Australian service that provides free, independent information about social security law and its administration through Centrelink)—believes there is also a correlation between youth debt and Centrelink payments.
The Network’s President, Mr Michael Raper, says that Youth Allowance—a Centrelink payment that exists to assist young people while they're gaining education or looking for work—is ‘providing little more than pocket money and forcing young people into a spiralling cycle of debt.’
Raper's claims are based on findings from the Department of Family and Community Services (which conducted focus groups with young people and community workers across NSW), twhich rehat 62 per cent of young homeless people have a Youth Allowance debt to Centrelink. He believes that the cycle of debts often beings when young people take out extra Centrelink loans to supplement their income.
‘The problem begins because Youth Allowance payments, at [just under] $150 a week, are woefully inadequate. As a result, large numbers of people on Youth Allowance are forced to borrow from Centrelink in the form of an advance payment of up to $500 Young people then struggle to pay off the advance and can wind up trying to struggle on $16 per day,’ says Raper, who also questions how young people can 'survive, pay rent, buy food, books, a bus ticket or dress for an interview' under such economic strain.
The answer is that young people often scrape by, but many also end up experiencing family breakdown and homelessness. This issue is often overlooked because young homeless people aren't always immediately visible.
Protecting yourself from debt
So what can you do to prevent the cycle of debt? Here are some tips:
1. Start an online savings account. These typically have higher interest rates than standard bank accounts.
2. Avoid credit go debit. Pay for goods with cash. If you must get a card to complete your transactions such as concert tickets then get a debit card. These allow you to use your own money rather then the lender's money.
3. Budget. Spend only what you need and set aside money for treats.
4. Drive less, walk more and socialise closer to home.
How do I know this?
Parliament of New South Wales, ‘Youth Debt’, last modified December 2007
http://www.parliament.nsw.gov.au/Prod/Parlment/
Hansart.nsf/V3Key/LA20031028025
The Welfare Rights Centre, ‘Youth Allowance and youth poverty’, National welfare rights network, Sydney, June 2002
http://www.welfarerights.org.au/Policy%20papers%20%20submissions/breachesfinal.doc
ABC Online, ‘Survey highlights growing youth debt’, July 2004
http://www.abc.net.au/news/stories/2004/07/23/1160438.htm
Youthinformation.com, ‘Spending money unnecessarily’, The National Youth Agency, London
http://www.youthinformation.com/Templates/Internal.asp?NodeID=90950
Simon C & Sinclair L,’ End of the love-in’, The Australian, October 2006
http://www.theaustralian.news.com.au/story/0,20867,
20611300-28737,00.html
‘Managing debt’, Youth Central
http://www.youthcentral.vic.gov.au/Managing+Money/
Saving+&+spending/Managing+debt/
Dunleavey, MP, ‘How teens get sucked into credit card debt’, MSN Money
http://articles.moneycentral.msn.com/SavingandDebt/
ManageDebt/HowTeensGetSuckedIntoCreditCardDebt.aspx
SBS World News Australia, ‘Rudd promotes outcomes of 2020 Summit’, April 2008
http://news.sbs.com.au/worldnewsaustralia/
rudd_promotes_outcomes_of_2020_summit_545339
Media Release, 'Call to action to address massive youth debt, National Welfare Rights Network, October 2002
http://www.welfarerights.org.au/Media Releases/gt0702.doc
