Adolescents and young adults are often portrayed as “consumer idiots” in public, media and sometimes even professional discourse. If one believes these descriptions, youth debt is a widespread and alarming phenomenon, the causes of which can be quickly identified: The “wrong” handling of money, the lack of knowledge about finance, poor planning skills and the uncontrolled fulfillment of consumer wishes are the common explanations for financial difficulties towards over-indebtedness among young people. In the media, for example, photos of young people with shopping bags on shopping streets, with cell phones or expensive branded clothing, and when pulling out their golden credit cards dominate.
This attitude is also the basis of many surveys on the subject.
According to the indebtedness report of the Institute for Financial Services (iff), a “lack of general financial education”, “uneconomical housekeeping” and “consumer behavior” are relevant triggers for over-indebtedness. Even more impressive are the frequently quoted results of the survey by the Federation of German Debt Collection Companies (BDIU), which explicitly refer to the group of young adults: “Excessive consumption expenditure”, “Bad example of the parental home”, “Too little personal responsibility “and” too little knowledge of the economic context “are listed here as the main reasons for debt among young adults.
From a scientific point of view, however, this data is not very reliable. The results of the iff over-indebtedness report are based on surveys of debt advice centers, whereby “uneconomical housekeeping” or “lack of financial literacy” are defined as possible explanations in advance in the form of predefined answer categories. The BDIU study is creditor-oriented and based on assessments by employees of the debt collection companies involved. In this respect, the data from these studies essentially reflect the opinions of employees of the relevant organizations about debt relationships.
Conversely, from this perspective, the prevention and handling of financial difficulties or debt in young people is relatively clear: financial literacy must be promoted. It is now the focus of many (educational) programs. In view of the assumed “wrong” handling of money as the cause of financial difficulties and overindebtedness, these want to enable “correct” use of the available money and convey “sensible” consumption. This “sensible” action with regard to their own finances is intended to help young people, for example, by drawing up financial plans for their own households, permanently monitoring income and expenditure, constantly comparing prices and imparting knowledge in dealing with financial services or information about financial traps be taught.
Debt among young people
I n the context of the concept of financial literacy, debt among young people is thus identified as a personal and growing problem, which essentially arises from problematic or missing individual skills and abilities and which should be counteracted accordingly by the promotion of these skills. The term “competence”, anchored in cognitive psychology or educational psychology, indicates the individual-related focus. According to the definition of psychologist Francis Hartz, competency means “the cognitive skills and abilities available to or learnable from individuals to solve certain problems, as well as the associated motivational, volitional and social readiness and skills to make problem solving successful in variable situations and to use responsibly “.
In the following, we will discuss these assumptions and take a look at the financial difficulties of young people, which incorporate debt in real-life contexts and which reveals them from the importance of money and debt for young people.
Youth debt – an alarming problem?
The Federal Statistical Office provides economically independent data on the extent of the debt of young adults. According to this, 0.2 percent of the clients of the debt advice centers belong to the age group of 18 to 19 years old, and 6.5 percent of those seeking advice are between 20 and 25 years old. As this data is based on information provided by the debt advice centers, however, it is also limited in several respects: First, the information provided by the debt advice centers is voluntary and the disclosure of anonymized data requires the consent of the advised persons; on the other hand, employees of debt advice centers can only provide information about those young people who seek advice; in addition to the “number of unreported” adolescents in debt,
A study from German-speaking Switzerland is revealing with regard to the extent of debt among 18- to 24-year-olds. It comprises 537 young people from four different types of school or education: participants in a job-market-related bridging offer (SEMO), apprentices, graduate students and high school students. The results show that around 62 percent of 18 to 24 year olds have no debt. Of the 38 percent of young people in debt, around a quarter each have debts of up to $100, between $100 and $1,000, between $1,000 and $2,400 and $2,500 and more.
Overall, the authors come to the conclusion that, on the one hand, informal debt, ie the borrowing of money mainly from parents, with generally small amounts and a fairly short-term repayment (usually within a few days), “becomes a ‘ normal ‘organization the everyday life of minors (heard), with which many get along well “. On the other hand, they identify a small group of young people who are indebted to several thousand dollars and have little prospect of being repaid on time. These are young adults, most of whom come from socially disadvantaged families, have no further education and are often faced with critical life events such as early departure from their parents, unemployment or early school or apprenticeship, including (significant) financial costs.These young people also receive little support from their social environment – neither in the approaching crisis situations nor in coping with them. Other studies confirm this result.The authors conclude: “A problematic debt situation with several thousand or ten thousand dollars is usually at the end of a chain of social and health problems.”