03 Nov 2004
Attitudes To Debt
BMRB’s Target Group Index has been measuring the British populations responses to the statement ‘I don’t like the idea of being in debt’ since 1987. Overall broad agreement with the statement has stayed steadfastly at between 80 and 85% of the adult population throughout the years since then but there is evidence that there has been an underlying softening of attitudes which is more prevalent amongst some sub-groups than others and which may be a pragmatic response to growing debt levels.
Chart 1 shows that that ‘definite agreement’ with the particular attitude statement has drifted down from 61% of all adults (aged15+) to less than 49% while those unsure about their position (neither agree or disagree) has almost doubled from a little over 4% to almost 8%. The age group where there has been the least shift in opinion (from an admittedly low base) is the 15-24’s and that is mainly due to the fact that it is the age group that contains most of the nations’ students. Overall, 15-24’s in Britain remain almost as wary of debt as they were in the Eighties. However, the increasingly large 18-24 student population within that age band (having exhibited similar trends to the population as a whole up until 1999) are now returning to the levels of debt-wariness that were evident almost twenty years ago.
The impact of the relatively new exposure to high level student debt can even be seen when comparing 22-25 recent graduates with their age equivalents who did not go on to higher education. The former student group ‘carrying over’ a ten percentage points greater likelihood of agreement with being debt-averse than do their less highly educated (and possibly less debt-burdened) peers.
The extent of differences between age bands is even more marked when the complexities of Lifestage are taken into account – and the potential reasons for such differences become more apparent. Both ‘Fledglings’ (15-34’s living at home with their own parents without children of their own) and ‘Flown the Nest’ ( 15-34’ who are unmarried but do not live with anyone defined as being their own relations) show the same, comparatively strong, disregard for the problems of debt but they do so from two very different perspectives. While both are likely to be of the view that they can live now and pay later, those who have moved away from the parental home are far more likely to be faced with the commitment of paying rent or indeed a mortgage and the consequences of debt are that much greater as well as having become almost a way of life. As Lifestages are gone through (i.e the ‘Nest Builder’ stage followed by that of ‘Primary School Parent’) attitudinal discomfort with debt increases as reliance on it is likely to also grow.
At the top end of the Lifestage hierarchy (‘Empty Nesters’ and ‘Senior Sole Decision Makers’) the feeling against debt is at its strongest and, of course, the likelihood of no longer being saddled with a mortgage is at its greatest.
The strength of feeling towards debt very much correlates with credit related behaviour. Relative to the overall population, those who express less than average concern are significantly more likely to have used some form of credit in the past twelve months. Amongst the almost two million adults who express least resistance to debt the most likely form of loan is via a credit card - some 15% having had to pay interest within the last year. Personal bank loans come second in this debt hierarchy having been taken up by around 12% in the preceding twelve month period.
Analysis of those who exhibit least concern with the prospect (or indeed reality) of debt reveals that, unsurprisingly, they have distinctly different views on finance and indeed life generally. With regard to employment they are far more likely than average to believe that job security is less important than salary levels but are pretty equally divided on their desire to get to the top of their career. They tend to be less content with their standard of living and have above average belief that money is the best measure of success. They are themselves a hefty 40% above average for believing that they are ‘no good at saving
Those least concerned with being in debt are more likely to claim to do things on the spur of the moment. They are, by comparison with the national average, far less likely to think that it is worth paying extra for quality and 50% more likely to claim to spend money without giving great thought to what it is they are buying. Generally speaking they are much more the type to operate on the spur of the moment.
Their whole demeanour seems to be summed up by a ‘live for today and not worry about the future’ attitude coupled with a greater than average level of optimism which, it would appear, gives them the confidence to believe that their debts will eventually be paid off.
There can be little doubt that the plethora of publicity surrounding the nations private debt levels has helped to ease a greater number of people into some sort of comfort zone based on the fact that they are not as unusual as they might first thought although the prospect of a cooling in the house price market (and the lessening of that particular safety blanket) may well cause the nation to begin to think differently.