Problem debt is putting stress on family relationships, damaging children and trapping families in a downward spiral of borrowing, according to The Debt Trap: Exposing the impact of problem debt on children, a new report from The Children's Society and StepChange Debt Charity.
Two and a half million children live in families with problem debt, who are behind on £4.8 billion of household bills and loan repayments. A further five million children are in families that are struggling to keep up with repayments and risk falling behind.
This new report – backed by the Archbishop of York – for the first time lifts the lid on the devastating impact debt can have on children. Their findings show that children are suffering worry and anxiety, bullying and going without essentials as their families are trapped in problem debt.
The report reveals the numerous ways that debt affects children's lives:
- Bullying - Children in families with problem debt are more than twice as likely to be unhappy at school and be bullied because they don’t have the same things as their friends.
- Worry - More than half of children (58%) in families with problem debt say they worry about their family’s financial situation
- Family - Half of children in families with problem debt (47%) say it causes arguments in the family.
- Going without - Nine out of ten families in problem debt say they have had to cut back on essentials like food, clothing or heating for their children in order to keep up repayments.
- Early exposure to debt - More than half of children aged 10 to 17 said they saw advertising for loans ‘often’ or ‘all of the time’. But only one in five children said that their school had taught them about money management and debt.
The debt trap
Household budgets up and down the country are under strain, but families with dependent children face extra pressures as they are more likely to face unexpected bills and are less able to cope with sudden financial shocks eg redundancy, reduced hours or illness.
As families begin to struggle financially, many feel that taking on credit is the only way to make ends meet - a third of all families have had to borrow money to pay for essentials for their children in the last year.
This often marks the beginning of the debt trap as credit repayments begin take up a larger proportion of income and families find themselves cutting back on essentials.
Fixing the debt trap
The charities are calling for changes to how creditors treat families with children who fall behind on bills and repayments. The government should review whether the protection for children against the harm caused by debt collection – including evictions, bailiffs and court action – is fit for purpose and consider developing a ‘breathing space’ scheme to give struggling families an extended period of protection from additional charges, further interest and enforcement action.
A third of parents (32%) in problem debt said that councils were not helpful at all when they sought help with debts, and 42% of parents in problem debt said payday lenders treated them ‘badly’ or ‘very badly’.
'We cannot allow children to pay the price of debt'
The report calls on every council to create a debt collection strategy which takes into account the impact on families with children.
Regulators should make sure that creditors have ‘early warning systems’ in place, so they know when their customers are facing financial difficulties and offer advice and support. Earlier and wider access to debt support and advice could help families put the brakes on a downward cycle of debt and reduce the impact on children.
The report’s authors say that children should be learning about borrowing from their schools and families, rather than from advertising by lenders. The charities call for tighter restrictions on advertising to children, as well as piloting savings accounts for children through credit unions.
The report coincides with The Children’s Society’s launch of The Debt Trap, a campaign lifting the lid on the massive impact of debt on children’s lives.
Find out more about our campaign.
The Archbishop of York, John Sentamu, who is supporting the report and campaign, said:
'Parents living in poverty face incredibly difficult choices. What is to come first? Heating your home or putting food on the table? Many choose to go without themselves so they can provide the basics for their children. Parents want to make the best choices for their family, but low wages, expensive childcare and inflexible jobs make this very difficult.
'When the monthly struggle to pay the bills becomes too much, often families think they have no option but to borrow money to provide the basics for their children. We need to make sure families living in poverty have somewhere to turn other than to usury-lenders.'
Matthew Reed, Chief Executive of The Children’s Society, said:
'Families are increasingly relying on debt as a way to make ends meet – but we’re in danger of ignoring the impact this is having on children now and in the future. We cannot allow children to pay the price of debt.
'With little savings to fall back on, it can take just one unexpected setback - like illness or being made redundant – to tip a family over the edge and into a debt trap that can feel impossible to escape from.
'This research exposes the shocking reality of parents lying awake at night worrying and unhappy children going without. Many families are feeling the squeeze and parents struggling on low wages are battling just to pay the bills.'
Mike O’Connor, Chief Executive of StepChange Debt Charity, said:
'This report is a stark warning to policymakers, creditors and the wider society of the devastating effects of debt on children. Families face a unique set of pressures, but the sad reality is that for many parents credit which is often unsustainable has become the only way to cover their essential household bills.
'As parents become trapped in a toxic cycle of debt, children can become the unwitting victims. This is not acceptable in a society that aspires to justice and fairness. We need concerted action to ensure financially vulnerable families are given ‘breathing space’ to help them get back on their feet and protect both children and families from the most harmful effects of debt.'
For more information, to arrange an interview or for case studies, please contact:
The Children’s Society media team on 020 7841 4422 (office hours only) or email. For out of hours call 07713 878298
The StepChange Debt Charity media team on 0207 391 4598 (office hours only) or email. For out of hours call 07985 404 153.
- Join the conversation on Twitter - use the #DebtTrap hashtag
- For the purpose of this report, a family with ‘problem debt’ is one which has fallen behind on the repayments of bills or credit commitments. Families with debt, but where they are keeping up with payments, are not included.
- The findings in this report come from original analysis of data from these sources:
- An original survey of 2000 UK families with dependent children, commissioned by The Children’s Society and administered by Research Now. The survey gathered information from both a parent and a child (aged 10-17) in the household.
- An online survey of 4442 British adults commissioned from YouGov.
- Fifteen in-depth interviews of parents with children facing problem debt, who are currently, or have previously been, StepChange Debt Charity clients.
- In six cases, we also interviewed children in the family. Interviews with parents and children were conducted separately.
- We also conducted a focus group with a small group of young people in Manchester.
- The Children’s Society wants to create a society where children and young people are valued, respected and happy. We are committed to helping vulnerable and disadvantaged young people, including children in care and young runaways. We give a voice to disabled children, help young refugees to rebuild their lives and provide relief for young carers.
- StepChange Debt Charity’s ethos is to help the 'can't pays', not the 'won't pays', and does not condone debt avoidance. StepChange Debt Charity always aims to help its clients pay back what they owe, in a realistic timescale and manner that is suited to each individual’s situation.
- StepChange Debt Charity is self-funding. Lenders share with the charity the benefit they receive from its operation, making a donation from the money repaid to them. This allows StepChange Debt Charity to retain its independence and ensure that its advice is always in the best interest of the client.
- The StepChange Debt Charity free phone helpline 0800 138 1111 is open 8am to 8pm, Monday to Friday and 8am to 4pm Saturday.
- Online help is available any time from StepChange Debt Charity Debt Remedy at the StepChange website
- Follow StepChange on Twitter: @StepChange and @Moneyaware