Raised in Debt: Children Suffering As Result of Decadent Debt Culture

With almost 1.4 million UK families in problem debt, a new report reveals the devastating impact debt can have on children, calling for urgent action to ensure families get the support they need to better protect children from debt-related harm.

The Debt Trap, the recent report from Children’s Society and the debt charity, Step Change, backed by Dr Sentamu, the Archbishop of York, is a comprehensive study of the effect of debt on families with children. For the first time, the charity report reveals the disturbing adverse effects on the children of Britain’s debt culture.

"We cannot alloow children to pay the price of debt" - Matthew Reed, Chief Executive of The Children's Society.
“We cannot allow children to pay the price of debt” – Matthew Reed, Chief Executive of The Children’s Society.

Disturbing Results

• 2.4 million children live in families with problem debt
• Families with children are behind with payments of £4.8 billion
• A further 2.9 million families with dependent children are struggling to keep up.

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.’

The report acknowledges that debt can befall everyone, with drivers of problem debt often rooted in insufficient earnings over an extended period and temporary personal economic disturbances, such as job loss, which can ultimately lead to borrowing and taking on credit. The research indicates this vicious, spiralling circle of further credit and debt leaves parents at mercy above other groups. Dependents reduce disposable income, often resulting in the household unable to meet living expenses. The pressure of dependency makes savings and budgeting more difficult, with the prospect of easily-attained quick-fix credit seeming the best answer.
Most harrowing, is the matter of how the children of these statistics are affected:

Emotional distress: Families affected by debt are twice as likely to argue, with the household suffering from stress.
Worry: 60% of children in surveyed families said they worried about their family having enough money.
Bullying: One in five children said they were bullied as a result of their family’s finance, with more than half saying they were embarrassed because they lacked the things their peers had.
Difficulty at school: children unhappy at school, as a result of their family’s problem debt, potentially leading to a detrimental impact on their prospects.
Trouble with social engagement: 73% of children found it difficult to take part in social activities, due to their parents being unable to afford them.


Addressing the Debt Trap

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.’

Based on the findings, the report concludes with recommendations with focus on reducing the harm to children caused by problem debt, reducing the impact of problem debt on families, and recommending early interventions to prevent problem debt.

The campaign calls for a change in how families with children are treated by creditors when they are unable to meet repayments. With a third of parents in debt finding their councils unhelpful when they sought support, the campaign suugests the need for alternative payment arrangement which parents may opt into for Universal credit.

Ruth Lea, economic adviser at the Arbuthnot Banking Group, has criticised the prospect of the new repayment methods, stating:

‘If these terms were enforced parents would find it harder and harder to get credit.
‘They would find nobody would lend to them, or loans would become very expensive.
‘The effect would be to force people who need loans into the hands of loan sharks.’

The Archbishop of York, Dr Sentamu, who backed the report, and is supporting the 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.’


Financial Education

The campaign suggests the Government should review the case for tighter restrictions on loan advertising seen by children. However, with the Government’s application of Financial Education, taught in maths and citizenship at key stages 3 and 4 from September 2014, children will be taught in schools, increasing a future generation’s financial capability, breaking the vicious cycle of financial illiteracy in the UK.

For more information on Financial Education, take a look at our previous blog.


If you are struggling with debt, call Harrington Brooks today to speak to an adviser about the most suitable options available to you. Call today on 0800 048 1764 from a landline or 0330 102 0165 a mobile.