Young people and debt: Strategies to avoid lifelong financial challenges

Today’s youth face wide range of financial challenges that were largely unheard of a generation ago. The cost of rent, real estate, post secondary tuition and consumer products are all largely outpacing inflation. Not only does that mean the thought of purchasing a home, paying off student loans or saving enough to retire comfortably seems increasingly out of reach — but a growing number of young people are also turning to Bankruptcy and Consumer Proposals to address their financial problems.

Why are relatively young people facing such high debt loads and shaky financial futures so early in life? Let’s look at some obvious and not so obvious factors that may be contributing along with some tips to help the young people in your life prepare for a lifetime of financial wellbeing.  

Pressure to conform

Being judged for how one looks, what they wear, who their friends are and what their do in their spare time can be difficult. Yet, this is an everyday occurrence for a teenager. It’s often easier to go along with the majority than stand out as different.

When a young person’s friends all have the latest smartphones, video games, clothing and cars, it only amplifies the pressure to fit in. But acquiring these types of things is rarely easy and often results in one spending all their income or eventually getting a credit card and racking up a whole bunch of debt.

How you can help

It’s a struggle for anyone to accept that some people simply have more money than others — even more so for children and adolescents. However, the earlier young people can get experience with managing and budgeting money, the better prepared they will be to make responsible financial decisions as they become more independent.

Take time to speak with your children and students about the benefits of saving, investing, living within their means, financial goalsetting and prioritizing needs over wants. Whether they earn an allowance or are applying for their first part time job, continue to encourage these habits until they become automatic. This will help them navigate the peer pressure more effectively and be more cautious and thoughtful about taking on consumer debt when the opportunity presents itself.  

Social Media

The phrases YOLO (you only live once) and FOMO (fear of missing out) drive many young people to pursue and imitate the excesses of their digital peers and idols, often at any cost. However, social media rarely reveals the full story of someone’s material success — or lack thereof.

What is the true price of constantly wearing the latest fashions? Can you really become a millionaire overnight if you just invest smartly? Is travelling the world and working from a laptop as easy and affordable as it appears? Is it normal for a first-time home buyer to purchase a custom build complete with high-end finishes?

It’s not that these things are never possible — but a wider lens is critical in the social media space, where almost everything is taken out of context.

How you can help

Help young people understand the amount of time, money and energy it took influencers to achieve the so-called perfect life or lifestyle. Demonstrate critical thinking skills that will help them uncover the truth behind what their idols are portraying.  

The more young boys and girls are able to separate their self worth from their material wealth, the easier it will be to overcome the urge to measure up to strangers on a smartphone. Bonus points if you can get them to recognize the person they’re trying may just be drowning in debt themselves.

Instant Gratification

Strong impulse control is critical for financial and career success over the long term. It’s also something young people naturally tend to struggle with. And while most get better at delaying gratification as they get older, certain cultural and technological shifts are increasingly getting in the way of that.

• Computer games deliver immediate feedback and capitalize on a players’ highly sensitive reward response.
• Online shopping orders are available at the click of a button and can be on a person’s doorstep in two days or less.
• The rapid availability of credit means people don’t have to save up or even wait for payday to buy the latest gadgets or must have clothing item.

These only amplify young people’s innate belief that they should be able to have whatever they want, whenever they want it. And it requires an even higher level of vigilance among parents and mentors to encourage restraint and patience when it comes to spending money.

How you can help

Be extremely vigilant about helping young people understand the value of earning a desired result. It’s okay to say no sometimes. Even better is sitting down and helping them become resourceful or creative about finding ways to turn that ‘no’ into a ‘yes’.

For example: Instead of simply telling a young person they can’t have a new laptop, encourage them to come up with a plan to earn and save the money themselves. This could include getting a part time job (if they’re old enough), mowing lawns or shoveling sidewalks around the community or even doing chores around the house for an allowance.

Nobody wants to feel responsible for a young person’s disappointment and sadness when they don’t get what they want. But the child or teenager isn’t the only one who is learning a lesson  here. Adults also need to practice waiting for young people to earn the satisfaction of a job well done — but the payoff is extremely worthwhile.

Life-Changing Debt Solutions

Young people today face immense financial challenges that no other generation has before. And many are struggling with unmanageable debt in silence — either because they don’t know what options are available to them, or because they’re too embarrassed to reach out and ask for help.

If this sounds like someone you care about, encourage them to reach out to a Licensed Insolvency Trustee for a Free Confidential Consultation today. During this no obligation meeting, a Licensed Insolvency Trustee will review their entire financial situation, seek to understand their challenges and goals and identify opportunities to permanently overcome their debt.

These options could include Bankruptcy or a Consumer Proposal, which could help them become debt free in as little as nine months from their initial filing. It could also include referrals to external services to help learn budgeting and life management skills and counselors to address compulsive spending, peer pressure or other social challenges.

Young people have their whole lives ahead of them and there are better ways to spend those years than stressing about debt. Help someone you care about get the financial fresh start they need and deserve today.