Younger people are putting high-risk investments ahead of debt repayments, leaving them in a highly precarious position. While for many people investing is a habit which really can boost long term financial health, its counterproductive if you are struggling in the red.
Its extremely worrying that among Millennial and Gen Z households who are in arrears, 70% of people are investing, or speculating, when they should be focusing on getting out of debt and building up their financial resilience. Of those in arrears in the poorest slice of society, 28% of households are investing, compared to 10% in the richest portion of the population. Our research backs up earlier findings from Britains financial watchdog, the
While it goes against what any financial expert would recommend, its easy to see why they may be in this position. If money is incredibly tight, its perfectly understandable that people will look for a magic bullet, to try to find a way to lift them out of financial difficulty. Its one reason why in this position, people will consider games of chance. However, this is not how investment works.
A get-rich-quick gamble of taking a high-risk investment with something like crypto currency runs a huge risk of backfiring, so you end up losing money and in a worse position than you started with added arrears. If you have high-cost short-term debts, then making repayments should be your priority. Once youre on top of this, you can look to rebuild your resilience elsewhere, including sensible investments.
For an awful lot of people theres no easy solution, because they dont have savings or investments they can use to pay their arrears, and they tend to have much less surplus income at 30 on average, leaving them little left over to prioritise debt repayments with. If youre in this position, the first step is to cut back any possible expense you can. If you have already tried everything, its worth speaking to those you owe money to as soon as possible, to try to find a compromise which includes lower payments. If this feels too daunting, you can speak to a debt charity, like Stepchange, who can speak to them for you. If you cant come to an arrangement, theyll also take you through the other options until you can find something that works for you.
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