Young adults most likely to overspend

Many aged 18-24 are over £6,000 in debt

NEARLY three out of every four young people spend more money than they make. New data from the Office for National Statistics shows that between April 2016 and March 2018, 71 per cent of people aged 18 to 24 were spending more than their income.

That is by far the highest proportion out of any age group - the next highest, those aged 25 to 34 years, saw 50 per cent spend more than they earnt.

The figures show that overall, just under 40 per cent of all households in Britain spent more than they made during that time.

The ONS say there are several factors that may explain this - including the fact that income is more likely to be underreported than expenditure by those in the lowest income bracket.

Another possibility could be that these households suffered a temporary spell of low income that could be managed in other ways, such as relying on family or friends, or drawing on savings.

However, 17 per cent of households did not have enough money to maintain their overspending for more than a year.

For the 18 to 24 age group, households who overspent had on average around £1,100 in savings.

But the average amount of overspending was £6,500 - over five times that.

People aged 65 to 75 were much more likely to be able to cope with overspending.

Those who overspent did so by £2,900 on average, potentially cutting into the average savings of £20,600 for households in this age group.

Richard Lane, director of external affairs at Step Change Debt Charity, said that rising living costs and wage stagnation for young people are to blame.

He said: “Over the past five years we have seen 18-24 year olds overrepresented among our client base.

“In 2018 they made up 14% of our clients and had average unsecured debts of over £6,000.

“Young people are more likely to have insecure or irregular income and are less likely to have savings built up to cope with any potential income shocks.

“Couple these factors with recent wage stagnation and rising living costs and it’s clear why overspending among this group is so prevalent.”

Young people also appear to be over-represented in the lowest financial brackets.

Over a quarter of households with someone aged 18 to 24 years were in the bottom 20% for spending, income and wealth.

This is compared to just four per cent of those aged 65 to 74.

The same data set showed that young people were paying almost double the proportion of their wages on housing than older groups.

Of people aged up to 34, just under 24 per cent of their income was spent on housing.

This is around double of what people aged 55 to 64 pay, at just under 12 per cent.