Study Shows Debt As A Recipe For Family Friction

New Research Reveals Conflict In Families Between Saving And Debt - And Highlights Problem Of Britain's Debt Culture

Money in the Contemporary Family, a study for Nestlй Family Monitor, reveals a conflict in British families between the traditional savings ethic, and the apparent inevitability of debt in today's society. Children are becoming active consumers at an ever-younger age, students face rising debts, and concern grows that financial companies are too willing to lend money.

Project consultant, Professor Alan Lewis, professor of economic psychology at the University of Bath, said: "This unique study provides an important insight into attitudes toward money and debt. A fundamental conflict emerges between the traditional savings ethic, which remains strong in British families, and a belief that debt is unavoidable for many. There is evidence that this conflict is reinforced by government policies such as the Student Loan Scheme, and by the perceived willingness of financial institutions to lend money. There is real concern that we are creating a debt culture, which is effectively teaching young people that debt is normal and indeed inevitable for some people."

Neither a borrower, nor a lender be. Is debt inevitable?

Changing attitudes towards savings and debt are revealed by the study. Although the savings ethic remains strong - with 71% cent of respondents 'saving for a rainy day' - people believe that their parents were more prudent. Fifty nine per cent of respondents agree that it is inevitable you will get into debt nowadays. The perceived inevitability of debt is more pronounced among men (64%), 16-34 year olds (76%), and respondents in Scotland and Wales (69% and 68% respectively).

Student loans and debt culture

At a time when one in three young people are entering higher education, the Student Loan Scheme provokes a mixed response. Overall, 47% of respondents favour the scheme, while 37% oppose it. However, the position is very different with respondents who have children in higher education with 73% believing that student loans encourage young people to become accustomed to borrowing, with negative consequences.

Fifty five per cent of these respondents with children in higher education also agree that the Student Loan Scheme causes friction between students and their parents.

Who is responsible?

There is a strong feeling that financial companies are too willing to lend money - with as many as 90% agreeing with this view. Seventy one per cent believe that the Government should do more to help people avoid debt.

Commenting on these findings, Professor Lewis said: "People want to be prudent and save, yet debt is seen as inevitable among certain groups of society. While the government encourages savings through tax free ISA's, it is as though they are legitimising debt through the Student Loan Scheme. People are prepared to take some responsibility for getting into financial difficulties but there are strong feelings that financial companies should lend more responsibly and the government should provide more protection for consumers."

Too much, too young. Teaching children about money

As children become active consumers at an ever-younger age, parents are teaching their children more about financial matters, but want schools to participate in this activity, the study shows. Sixty two per cent of parents have given their children piggy banks and 46% have set up bank accounts for their children. However, 59% of parents thought schools taught just a little or nothing at all about money matters. In particular, parents would like schools to teach children about careers, personal finance, and understanding the use of credit and debit cards.

Professor Lewis said: "There is a strong desire for schools to provide teaching in personal finance - a result which should strengthen the resolve of the Financial Services Agency and the Department for Education and Employment in the preparation of curriculum resources on personal finance. The results also support calls by the Personal Finance Education Group to include personal finance education in the national curriculum."

Who wears the trousers?

Within the home, financial decision-making is becoming more democratic. Men no longer make most of the larger financial decisions, the study shows. Fifty nine per cent of married couples share a joint bank account and both contribute to financial decisions. Only 32% of unmarried couples living together organise their finances in this way.

Who wants to be a millionaire?

The survey also reveals that while everyone may want to be a millionaire, 61% of respondents would settle for 16364,000 or less to change the quality of their lives.

For the Nestlй Family Monitor study on Money in the Contemporary Family, 657 adults, aged 16 plus (of which 81 had children at University), were interviewed face-to-face in home by MORI in 60 sampling points across Great Britain between April 7 and April 23 2001. The Nestlй Family Monitor is part of a series of research studies into family life in Britain undertaken on behalf of Nestlй by MORI. Money in the Contemporary Family is issue number 12.