The annual report from the directory inquiry firm Creditreform has shown a clear trend in terms of debts among young people for years. The number of debtors under the age of 20 has more than quadrupled since 2004, according to the debtor atlas. Today, every eighth person in the age group between 18 and 20 is no longer able to cover running costs or at least not to spend more than the income. It doesn’t look much better for the age group between 20 and 30 years. Since 2004, the number of debtors in this group has grown by around 60 percent. But what are the main causes of this frightening development?
The main reason for the trend is the attitude of young people who no longer think about how much they can really afford when buying. More and more young adults are taking advantage of offers with apparently low installment loans, which often have to be serviced over a period of 24 months. In addition, many banks make targeted use of young people’s mood to consume by offering overdrafts to trainees and creating the illusion that you can afford anything without money.
For many young people, the joy of consumption is soon followed by the fear of the creditors. Quite a few young adults are in debt to a whole range of donors and have long been unable to service the monthly installments. The five largest debt traps are presented below to give an overview of the dangers for young people and to offer a way out.
The cell phone
The cell phone or the cell phone contract is the debt trap that most young people fall into. Anyone who does not have a mobile phone with an Internet flat rate these days is not one of them and cannot be online around the clock on social networks. The need for constant availability means that many young people take over when buying a smartphone and also choose a tariff that is far too expensive. In addition, the cell phone is a status symbol in the circles of many young people, which influences the position in the group.
The tricky thing about cell phone contracts is that not only are the contract fees debited monthly, but mostly the smartphone is also paid in monthly installments. As a result, many young people only pay 40 to 60 USD per month to pay the installments. In addition, there are also usage-dependent costs in many cases.
If you are interested in a new cell phone or a new contract, you should consider some important points before buying so that the bad awakening does not come in the end:
- The monthly installments due should be added up to a total amount. This is the only way to decide whether you can really afford a new smartphone.
- If in doubt, you should rather choose a cheaper smartphone and not be tempted by group constraints or your friends’ models.
- There are numerous comparison portals for mobile phone contracts on the Internet where you can find the cheapest tariff.
The car is not only one of the biggest debt traps for young people. Similar to the cell phone, it is viewed as a status symbol in many circles. Above all, many young people cannot estimate the running costs of a car. These include:
- Gasoline costs
- repair costs
If you add these three items, you easily get three-digit monthly amounts that teenagers pay for the maintenance of a car alone. With the salary of a trainee, this financial burden is usually not manageable. As with the mobile phone, the possibility of paying in installments when buying a car is another problem. Cars can even be ordered as a leasing car, so that no down payment is due at all.
The clothing debt trap is particularly important for young women and in many cases leads to overindebtedness at a young age. The advertising, which is completely focused on consumption, fools us into believing that you have to wear trendy, seasonal fashion in all seasons to look good.
Many young people nowadays even use clothing to pay in installments or use credit cards that only need to be serviced a month later. These circumstances mean that the purchase of a new coat brings joy at first, but after a while it causes the bad awakening.
The internet is full of dangers. The most serious are subscriptions that are not recognizable as such at first glance and oblige users to make monthly payments over a long period of time.
Young people often enter into contracts online without even being aware of them. In the case of a number of offers, such as streaming pages or the downloading of software products, the small print only indicates that the user is subscribed and has to make installment payments for a period of 12 or 24 months.
In many cases, such subscriptions are invalid and the user is not required to pay. It is therefore advisable to always consult a lawyer for reminders and have the relevant contract checked. If only the small print refers to the conclusion of a contract, this is usually invalid and no payment is to be made.
Young people want to move out earlier and build their own lives. In many cases, however, the trainee salary is not even enough for a shared apartment. Many young adults therefore take out expensive loans to finance chic apartments in good locations and to become independent of their parents.
The five biggest debt traps for young people together mean that more and more young people in their early twenties are in a vicious cycle from which they can no longer find their own way. In most cases, it is advisable to consult a professional advisor. Many institutions offer free help and show ways out of the debt trap.