This finding comes as part of a report from the firm looking at how the pandemic has driven borrowing among young people and how it has negatively affected their goals, aspirations and lifestyles.
According to the figures, 27% of people aged 18-40 have been forced to borrow money as a direct result of COVID-19 - for 62% of these, it’s the first time they’ve ever had to do this.
On average, those in Gen Z have had to borrow £1,479.57, while millennials have needed even more to get by (£1,836.05). Just under one in five (17%) 18-40-year-olds who have been forced to borrow took on debts of over £3,000, with amounts of up to £30,000 even reported within the research.
Many young people have needed to borrow money as a result of unemployment, pay cuts or furlough. SpareRoom’s research shows that 43% of 18–24-year-olds and 30% of 25-40-year-olds are currently unemployed or have seen their income reduced.
The top three things people aged 18-40 have been forced to borrow money to pay for are bills (43%), food (39%), and rent (32%).
The research reveals that 15% of Gen Z and 9% of 25–40-year-olds who were forced to borrow money due to COVID-19 did so to pay for private mental health care, illustrating just how deeply the pandemic has impacted young people’s wellbeing.
Of 18-40-year-olds, whether they’ve had to borrow money or not, nearly two thirds either believe they have (31%) or may have (32%) suffered from money-related anxiety or stress because of the COVID-19 pandemic.
Men who were forced to borrow due to the pandemic borrowed more than women, on average £2,066.99 and £1,491.51 respectively. Those who have been forced to borrow have been more likely to borrow money from friends (32%), their credit card provider (26%) and even get a loan from the bank (22%) ahead of asking for help from their partner or spouse (21%).
The ‘bank of mum and dad’ was the biggest lender over the past 12 months, with nearly half of those 18–40-year-olds who borrowed money due to the pandemic having done so from parents (45%). Nevertheless, the pressures of the past 12 months have taken their toll on some families, with a quarter (26%) of 18-40-year-olds admitting their parents are less likely to be able to help them out financially now than they were before the pandemic.
These generations don’t feel they can pay back what they have borrowed any time soon. In fact, one in ten (10%) 18–40-year-olds who have been forced into debt as a result of COVID-19 don’t plan to repay their debts for over four years, with some of them admitting they have no intention of ever paying back their lenders.
At the same time as being forced to borrow, 55% of 18-40-year-olds have had to cut back on spending to save money during the pandemic. For these respondents the top three cutbacks have been eating out/takeaways (60%), buying clothes (56%), and travelling/holidays (38%).
It’s not just lifestyle sacrifices 18-40-year-olds have had to make. For many, the effects of COVID-19 have also postponed some major personal and financial goals. The top three goals put on hold have been saving for a holiday (27%), buying a home (15%), and paying off debt (15%).
Of those 18-40-year-olds who had to cut back to save money over the last year, 43% don’t anticipate being back to their pre-pandemic spending levels until 2022.
Matt Hutchinson, SpareRoom Director comments: “Much has been made of the historic amount of government borrowing and how long it’ll take to get the economy back to ‘pre-pandemic levels’. But less has been said about how the pandemic is affecting individuals and what the financial hangover for the younger generations will feel like.
"This report shines a light on the extent of that problem. It’s particularly saddening to discover that so many young people have had to borrow money to access private mental health and counselling services, that were already struggling to cope with demand before the pandemic hit. Thankfully we’re starting to see light at the end of the tunnel in terms of how the virus itself impacts our daily lives, but the road to financial recovery will take a little longer.”
