MoneyTree AsiaPac

Click on image to enlarge

By Teo Cheng Wee

They are below 30, employed and mired in debt. This is the fastest-growing age group of debtors, say credit counsellors.

On average, they owe $55,000 to about seven creditors, according to new data from Credit Counselling Singapore (CCS), a non-profit group which advises debtors.

Under-30s made up 9 per cent of all cases handled by it in 2006, and 13 per cent last year.

In the first three months of this year, it went up to 15 per cent. CCS told The Sunday Times that most of these young adults are snared by materialism and a desire for the high life.

They splash money on cars, branded goods, overseas holidays, clubbing and gadgets.

Several also gamble their money away.

Young adults are not just facing credit woes - they are also forming a bigger percentage of those who become bankrupt, according to the latest figures from credit analysis firm Amequity.

Last year, people aged 30 and below made up 7 per cent of all bankrupts. In the first four months of this year, that has increased to 12 per cent.

A third report, by the Credit Bureau of Singapore (CBS), which tracks consumer credit behaviour here, also points to the same trend.

Released on June 13, the report noted that young adults aged 21 to 29 were more likely to miss their credit-card payments, or not pay them in full, compared with other age groups.

CCS president Kuo How Nam feels that it is a ‘definite cause for concern to see more young people with bigger debts’.

He puts it down to them succumbing to the temptations of consumerism, while knowing little about financial and credit management.

‘Faced with the euphoria that comes from finally earning some real money, youngsters tend to underestimate the income required of a certain lifestyle,’ he said.

Indeed, ‘overspending’ is the top reason given by people in this age group for being in debt.

Mr Leong Sze Hian, president of the Society of Financial Service Professionals, has been surprised by questions from young bankrupts at the weekly briefings for new bankrupts on the Official Assignee’s premises, where he volunteers.

‘They often ask ‘Will my guarantors be bankrupt?’. They clearly don’t realise what bankruptcy means,’ he said.

He has observed more young faces at the sessions and noted that young bankrupts are typically not rich, and that their debts usually stemmed from car loans and credit-cards debts.

Hong Kah GRC MP Zaqy Mohamad, who sees young adults once or twice a month over credit problems, feels that they have a false sense of security.

‘They always assume that because they’re young, they can earn more and their salaries can only go up. That’s why they dare to buy things on credit,’ he noted.

‘They don’t give any allowances for losing their job or suffering a pay cut.’

Besides suggesting that schools start equipping students with credit and financial management skills, Mr Kuo also pointed fingers at the ‘aggressive marketing’ of credit-card companies.

He said that financial institutions should practise more responsible lending and not encourage the proliferation of credit cards among the young.

CBS general manager Mark Rowley, however, said that ‘it’s very difficult to criticise the banks, as they’re in the business of lending money’.

The silver lining, he noted, is that the percentage of young people who default on credit-card payments is relatively low compared to other countries in the region.

‘And Singapore has the safeguard of credit-card limits. In many economies, there are no limits at all,’ he added.

This article was first published in The Straits Times on 22 June 2008.  Click here to see online version.

Click on image to enlarge

Click on image to enlarge

Click on image to enlarge

Click on image to enlarge

Other Related Articles:

• Money Tree Academy Launched!
• Nan Hua High School - Why Creativity is Important?
• June 2009 Holidays Fast Track Camps & Our Basic Programme
• MoneyTree Singapore on Channel NewsAsia
• MoneyTree Singapore on “I LOVE CHILDREN” BUS