Why did the credit crunch?

A couple of weeks ago I got interviewed about the credit crunch by a journalist from the New Statesman I am quoted in this article "Drowning in Debt" pontificating on one of my favourite subjects, passive consumerism and its impact on young people. A comment left on the article by a young person reinforces my point:

"I currently find myself staring down the barrel of £18,000 worth of debt; £13k student loan and the rest in overdrafts, credit cards and bills. I, like many my age, have consigned myself to a lifetime of debt in an almost fatalistic fashion; without the means to own anything of real value privately and with a collapsing economy there seems little reason to care. Despite having an excellent credit rating still I cannot help but toy with the idea of declaring myself bankrupt as to allow myself a clean slate for my future. Again, many my age also feel like they have been forced into this situation. We are products of our time; with little depth to the world past the consumerist façade we find ourselves living in and stuck in a quagmire of insurmountable debt that we will realistically never lose there is little hope left for the generation that will soon be in charge."

The position many young people find themselves in, particularly those who are most vulnerable, arises from a number of reasons. Not least that the benefits system often leaves them destitute and unable to meet even their most basic needs. But that is not the whole story as the quote from the young person above indicates. Our young people are growing up in a very different landscape, certainly from the one I did. Not only has consumer choice exploded, but so also has the availability of credit. Young people are starting out in life often saddled with student debt, in a housing market that virtually excludes them and a looming pension crisis. In such a climate, credit (which research shows many young people do not regard as debt so long as they pay their minimum payment), appears a seductive solution. Centrepoint (the youth homelessness charity) published a report a couple of years ago "Too much too young" criticising the targeting of young people with credit offers, of most concern was that a significant number of young people had been targeted after they became homeless and were living in hostels. And the peer pressure young people face also contributes to their need to be seen to be wearing the "right" trainers for example, regardless of other financial commitments.

A couple of years ago I was at a Foyer in East London, involved in a session on money management. I had said how much I resented buying something and then going into the shop a couple of weeks later to see the same item reduced. One of the young women said that didn't bother her, when I asked why she said "because I would have had it first".

The reasons for the credit crunch are multiple, but no-one can surely deny that an I want it and I want it now - throwaway consumerism contributes to over indebtedness. I am old enough to remember the days when a designer label was something you only saw in Vogue and shops had at most 4 changes of clothes collections a year - now it is every couple of weeks!

In my work on the FSA Financial Capability Strategy, we are training those who work with young people to support them to be more financially capable. Like trying to deal with teenage pregnancy the greatest challenge is that of changing behaviour, you can know everything, have the skills to do everything, know why you should....but if that doesn't result in behavioural change it is meaningless.