Young people getting into debt to pay for private health care
SpareRoom report reveals Gen Z and millennials have been forced to borrow thousands during pandemic for basic needs and private healthcare
– Over 1 in 4 (27%) people aged 18-40 have been forced to borrow money as a direct result of COVID-19
– For almost two-thirds (62%) of them, it’s the first time they’ve ever had to borrow money
– 15% of 18–24-year-olds and nearly one in ten (9%) 25–40-year-olds who were forced to borrow money due to COVID-19 did so to pay for private mental health services/counseling
– Nearly two thirds (63%) of 18-40s said they have or may have experienced money-related anxiety due to the COVID-19 pandemic
– Almost half (43%) of 18-40-year-olds who had to cut down on spending over the last year don’t expect to return to their 2019 spending until 2022
New research by flatshare site SpareRoom has found that 15% of 18–24-year-olds (Gen Z) and nearly one in 10 (9%) 25–40-year-olds (millennials) who were forced to borrow money due to COVID19 did so to pay for private mental health care, illustrating just how deeply the pandemic has impacted young people’s wellbeing.
‘The state of Gen Z and millennials’ individual economies’
This finding is just one of many in SpareRoom’s report ‘The state of Gen Z and millennials’ individual economies’. The report looks at how the COVID-19 pandemic has driven borrowing among young people and how it has negatively affected their goals, aspirations, and lifestyles. More than a quarter (27%) of people aged 18-40 have been forced to borrow money as a direct result of COVID-19 – for almost two-thirds of these (62%), it’s the first time they’ve ever had to do this.
On average, those in Gen Z have had to borrow £1,479.57, while millennials have needed even more to get by (£1,836.05). Just under one in five (17%) 18-40-year-olds who have been forced to borrow took on debts of over £3,000, with amounts of up to £30,000 even reported within the research. Many young people have needed to borrow money as a result of unemployment, pay cuts, or furlough. SpareRoom’s research shows that 43% of 18–24-year-olds and 30% of 25-40-year-olds are currently unemployed or have seen their income reduced.
The top three things people aged 18-40 have been forced to borrow money to pay for are:
– Bills (43%)
– Food (39%)
– Rent (32%)
Borrowing during COVID-19 pandemic has caused money-related anxiety or stress
Of 18-40-year-olds, whether they’ve had to borrow money or not, nearly two thirds either believe they have (31%) or may have (32%) suffered from money-related anxiety or stress because of the COVID19 pandemic.
Men who were forced to borrow due to the pandemic borrowed more than women, on average £2,066.99 and £1,491.51 respectively*. Those who have been forced to borrow have been more likely to borrow money from friends (32%), their credit card provider (26%) and even get a loan from the bank (22%) ahead of asking for help from their partner or spouse (21%)
Many turned to the ‘bank of mum and dad’
The ‘bank of mum and dad’ was the biggest lender over the past 12 months, with nearly half of those 18–40-year-olds who borrowed money due to the pandemic having done so from parents (45%). Nevertheless, the pressures of the past 12 months have taken their toll on some families, with a quarter (26%) of 18-40-year-olds admitting their parents are less likely to be able to help them out financially now than they were before the pandemic. Some parents showed support by opening the ‘hotel of mum and dad’, with 16% of 18-40-year-olds (who have parents) moving back in with their family to save money during this turbulent time.
These generations don’t feel they can pay back what they have borrowed any time soon.
One in ten (10%) 18–40-year-olds who have been forced into debt as a result of COVID-19 don’t plan to repay their debts for over four years. Some of them admit they have no intention of ever paying back their lenders.
Over half (55%) of 18-40-year-olds have had to cut back on spending to save money during the pandemic. For these respondents the top three cutbacks have
– Eating out/takeaways (60%)
– Buying clothes (56%)
– Travelling/holidays (38%)
It’s not just lifestyle sacrifices 18-40-year-olds have had to make.
For many, the effects of COVID-19 have also postponed some major personal and financial goals. The top three goals put on hold have been:
– Saving for a holiday (27%)
– Buying a home (15%)
– Paying off debt (15%)
Of those 18-40-year-olds who had to cut back to save money over the last year, 43% don’t anticipate being back to their pre-pandemic spending levels until 2022.
Getting married and starting a family has also been pushed back:
– 16% of Generation Z who postponed their wedding admit they now won’t be able to seriously consider this again until after 2025
– Of those Gen Z who have postponed starting a family due to the pandemic, 16% also said they now won’t be able to seriously consider this again until after 2025
This report shines a light on the extent of that problem. It’s particularly saddening to discover that so many young people have had to borrow money to access private mental health and counseling services, that were already struggling to cope with demand before the pandemic hit. Thankfully we’re starting to see light at the end of the tunnel in terms of how the virus itself impacts our daily lives, but the road to financial recovery will take a little longer.”