Young People Facing Increasing Financial Stress

The following is a guest post from Emily Starbuck Gerson who blogs at Taking Charge.

A new report, "Young People: Living on the Edge," (pdf) has been released by Qvisory, a new advocacy group aimed at helping young adults with their money, work and health concerns. Based on a survey of 1,015 19-to-35-year-olds administered by cell phone, opt-in Web panel and invitation-only Web panel, the report concludes that young adults are facing increasing financial stress and concern.

The report says young people are "struggling to get by, day-to-day, and putting their long-term plans on hold. At a time in their lives when they should be building better for their future, the rising cost of living combined with the debt they are carrying and makes paying bills and making ends meet a source of stress and struggle." One reason why young people are struggling, the report suggests, is because they do not have the same resources as older people.  Young adults are less likely to be married with two incomes, do not have much job or credit history and receive little to no support from parents.

Finances a great concern

While this is a situation most young people will inevitably find themselves in, our current economy is changing the game a bit. In last year's survey, 44 percent of young adults said finances were their greatest concern. In this year's survey, 55 percent of young people said finances and the current economic conditions were their greatest worries -- "they do not believe they have enough money to keep pace with the cost of living," the report says.

When asked about specific financial worries, the price of gas was ranked highest, with the ability to pay bills second and finding or keeping a good paying job was third. Debt came next, and then the price of food and groceries.

Life with debt

The report found that finances are also difficult for this age group because so many major life-changing events accompany early adulthood -- graduating from school, getting the first job, marriage, owning a home and possibly having children. "They are entering their adult lives saddled with debilitating debt and a changing economy that offers fewer stable, good paying jobs, especially for young people without a college education," the report says. Over a third (37 percent) of survey respondents reported they have more debt than last year.

Forty-eight percent of young people frequently worry about having enough money to make ends meet.  In fact, 65 percent of those surveyed know a young person who is in a financial crisis or unable to pay the bills. Additionally, 19 percent have had their phone, cable or utilities cut off because they could not pay the bill, and 15 percent have had their credit revoked.

Two-thirds of respondents currently have a credit card and more than half have credit card debt. Unfortunately, 57 percent pay only the monthly minimum and 36 percent have paid a late fee for a credit card. It's not just credit cards -- 62 percent of young adults with credit card debt have three or more types of debt (usually car and student loans). The study found that those with credit cards have more overall debt than those without credit cards.

While 52 percent of young people have credit card debt, 38 percent have car loans, 37 percent have student loans and 28 percent have unpaid medical bills.  Most frightening, 64 percent of young adults with unpaid medical bills actually do have health insurance.

Not counting home or student loans, 44 percent of young people are more than $5,000 in debt and 22 percent are more than $10,000 in debt.

Changes in behavior

The survey found that most young adults are making changes to cope with financial hardship. Seventy-three percent are staying home instead of going out, 71 percent are using coupons (me included!), 70 percent are not shopping for clothes or music (I have to work on that), 37 percent have skipped a meal, 36 percent have given up a hobby or activity and 35 percent are taking public transportation or walking instead of driving. Another 23 percent have cut up a credit card.

Reaction

While the results of this survey are depressing, I am certainly not surprised. As a financially independent woman who has been out of college just over a year, I can certainly relate to some of these findings. I'd like to be saving more money for retirement and travel, but I am overwhelmed by the rising costs of gas, food and energy. I've definitely noticed that my money isn't going as far as it's used to, and it's disheartening to think about the possibility of more inflation.

While some months I scrape by, fortunately, I do not have any major debt -- just the occasional couple-hundred on the credit card that is almost always paid off by the next month. For that, I am extremely grateful, because I have many friends drowning in student loans and other debts. I have done my best to avoid accumulating debt and I feel very lucky to have escaped that burden for the most part. I just hope the cost of living doesn't rise much further, because that may be enough to put many debt- free young people in the red.

If you would like to see a presentation on the survey by the woman who conducted the research for Qvisory, click here.

Comments

[pink panther]

August is a slow month ... young people have always struggled to establish themselves. Of course they're putting long-term plans on hold until they've done this, that's why they're long-term plans. Staying home and not buying music is just reality for people who have to support themselves. You get your priorities straight in a real hurry. I bought the first winter coat I'd had since sometime in high school with my first paycheck, not entertainment. Money never goes as far as it used to. We're living in a golden age now compared to historical norms. I would like to know who has skipped a meal in modern America - that seems hyperbolic.

Some things are scary. The trend away from insurance and to HSAs ought to scare people when they realize how screwed they are with a HSA. (Hint: You start at $0 and get no benefits until you put money into the account. You will be paying full-price, no co-pays, for all medical expenses like meds, office visits, etc so good luck paying for that and funding the HSA.) But these are general trends and not just for the young.

[tom]

This may rub a lot of people the wrong way, but since when is 35 a young adult? It seems that by having such a broad age range in this survey it doesn't tell the true financial story. If they want an accurate reflection of young adults, they should be surveying ages 20-26. That age range reflects all college/grad school and tech school grads who are just starting out in the workforce.

[Kevin]

Two words - entitlement mentality. It's just fine when Mom & Dad are paying for everything - cell phone, entertainment, cars, gas, insurance. Once young people get out on their own, they realize this all costs real money. Of course, most of these things are "wants" not needs. I suspect the debt is hard to deal with, but harder to deal with may be the fact that these young adults realize they won't be able to live like they once did - for awhile anyway. I know, I've been there just about 10 years ago and just a few years ago dug my way out of the debt.

[Uncommonadvice]

People are just going to have to realise that we are on the brink of recession (if not already in it!) Now is the time to batten down the hatches. Minimise expenditure - maximise income. No new cars, no holidays - just get stuck in to debt reduction and/ or saving.

[Jim]

@panther re: "I would like to know who has skipped a meal in modern America - that seems hyperbolic."

What are you doubtful about?? Millions of Americans skip meals because they can't afford food. Some references via a quick google search for 'hunger in America' ...

http://www.hungerinamerica.org/who_we_serve/Services/options.html
http://www.oaklandinstitute.org/?q=node/view/104
http://www.capitalareafoodbank.org/documents/documents/CAFBHungerinAmerica2006ClientSurveyDataBrief.pdf
http://abcnews.go.com/WNT/story?id=2659818&page=1

Jim

[V]

Student loan debt has been getting ridiculous over the past few years. Many college students that I know are already $30,000 in debt and they aren't even done yet! And I am talking about public schools. If one wants to go on to graduate school/professional programs, that constitutes even greater debt.

[Gavagirl]

I concur with V's point, and would like to add that many people put off college until several years after high school graduation these days. Many more take much longer than the traditional four years to finish too, often because they are trying to avoid taking on too much debt by attending part-time and holding down a full-time job. So no surprise that there are quite a few 35-year-olds out there with careers that are just now getting traction.

[deepali]

Lots of flash, little substance. We have real data on what it takes to make ends meet in this country. With a few exceptions, just about any college grad with a job can do it. "Stress" comes from not differentiating between wants and needs.

As someone who does research on *real* coping mechanisms, I find this a very poorly designed study that's only meant to generate hype.

[Kat]

As someone who is in serious debt soley because of student loan debt, I find some of these comments way off base. Most of my friends do not have an entitlement mentality and have been on their own since 18.
Have you ever tried doing business without a cellphone? I do it every day because I can't afford one and it is extremely hard. Very hard especially when you are in a profession that sends has you out in the field a lot and everyone expects you to be reachable, including adults(over 35).
Try doing business without a car? Very hard to meet clients after biking for 45 mins or on the bus for 1.5 hours. I live in a major city, so I can't imagine what people outside cities do.
Try living without health insurance? Pray you don't get sick and if you do it is just a small bug.

[Millie]

Great article!

@ Pink Panther, are you joking?! It happens more often than you'd think. I skipped dinner four nights per week in the five months following graduation. An $8 per week grocery budget doesn't go very far.

It's been getting better following a raise that I negotiated, but student loans still suck ($115k)!!

[resonanteye]

Yes, maybe things have always been tough...but when my parents were my age they were a family of four surviving on one medium-low income, and owned a home.

Who can buy a house on a starting salary now? Without credit history (as my parents did?)

And I won't even mention my grandparents...who bought a home on the starting salary of a man with a third-grade education. I don't hear about anything like that happening these days.

[resonanteye]

and @ deepali, would you consider health care a want or a need?

Housing a want or a need?

transportation?

All of these things were things my parents and their parents were able to get, with much less training and work experience and schooling than I have.

[Angie]

I wonder if part of this is because older generations got married younger and had two wage earners, or one wage earner and one household manager. Today's twenty-somethings are providing everything for themselves, unless they are sharing living expenses with a roommate.

The proportionally higher costs of housing and health insurance, as well as the necessity (and expense!) of a college degree obviously play a large role as well.