One of the consequences of the financial crisis is the increasing number of families falling into debt. Reliance on credit helped create the debt problems of recent years, but families are now turning to credit once again, e.g. payday loans, to alleviate the pressure they’re under. As ever, it’s families, especially those on low incomes, who are bearing the brunt of these economic woes. While benefit payments and relatively stable employment mitigated the worst effects of debt historically, the impact of COVID-19 and the more uncertain nature of modern employment have altered the dynamic regarding family finances.
For example, the rise in zero-hours contracts, benefit cuts and increased self-employment (to name but a few) have contributed to a less secure working environment. With household income reducing and expenditure steadily increasing, many families are falling into a spiral of debt they find difficult to control. One of the effects of this income fluctuation is families experiencing sudden and unforeseen drops in wages that create a temporary crisis in household budgets. A recent study by Citizens Advice shows that 56% of parents in debt have had to cut back significantly on spending to ensure that their children don’t go without.
Sudden Income Changes
Let’s take the example of a parent on a zero-hours contract. By definition, there’s limited security in this type of employment where hours can be cut or employment scrapped altogether on minimal notice. Although such contracts may benefit a student or young school leaver, they’re unlikely to be suitable for a parent who urgently needs to pay the mortgage and fund school uniforms. Of course, there’s nothing new in this. Sudden changes in circumstances (redundancy, separation, illness etc.) have always precipitated debt problems. However, the changing nature of modern employment has made such scenarios much more prevalent.
Those on low and middle incomes are more likely to be affected, concurring that the rise of zero-hours contracts is a significant contributory factor. Other factors like increasing rents, utility bills, and general hikes in the cost of living have also added to the problem. It’s an issue that’s not going to go away either. Incomes are set to fluctuate for the foreseeable future, with families and legislators struggling to adapt to a changing world.
The Effects of Debt on Families
3.6 million families have been pushed into debt since the beginning of 2020; that’s almost half of all households with children suffering financially and having to borrow money to survive the economic effects of COVID-19.
A disproportionately high number of debt relief clients are families. While couples and single people also struggle with money worries, the problem always seems more acute for those with children. Parents tackling the burden of family debt feel the strain that little bit more as they bear the responsibility of feeding multiple mouths. At Debt Movement, our clients aren’t statistics. They’re real people who are struggling to feed and clothe their families in a rapidly changing society.
The Effects of Debt On Mental Health
Throughout 2020 and into 2021, there have been grave concerns about the effects of isolation on people’s mental health. Charities and social groups have come together to minimise this, with volunteers offering phone calls and a place for people to reach out when they need interaction.
However, as we approach the easing of social restrictions and enter the ‘new normal’, we must recognise the impact that debt is having on the mental health of a large proportion of households. Debt can affect more than just your bank balance. It can affect relationships, social lives and even the mental health of our children who we must remember are living in debt along with us.
The Money Advice Service states that;
“For children, debt can undermine their relationships with their peers and may mean missing out on socialising or school trips, leaving them feeling isolated, excluded and ashamed. In some cases they are going without basics such as food, clothing or heating. They can feel a sense of failure for not being able to help their parents deal with their debts, leaving them with lower self-confidence and self-worth.”
Debt Movement wants to help relieve some of the pressure and stress from families struggling with problem debt. Our friendly and professional team can talk to you about your financial situation and help you to understand the options available to you. In resolving debt, we are undoubtedly removing financial problems, but we are doing much more. We are providing peace of mind, and for millions of families, that’s priceless.