Why are people bad with money

Do young people deal badly with money?

More and more young people end up on the warning list, warns the credit protection association. The misery often begins with excessive consumer wishes.

Vienna. 26 years old and not too educational. This is how you could describe the type of person who is most likely to end up on the warning list of the credit protection association (KSV1870) in Austria. People with massive payment problems are recorded there - due to unpaid account overdrafts that go beyond the scope or unpaid loans.

About 300,000 people are on the warning list. The number of new entries per year is on the rise: five years ago around 13,000 new people were registered, most recently it was 20,000, reports KSV-1870 boss Ricardo-José Vybiral to journalists. The proportion of younger people under 35 makes up almost half of this. And the biggest increase was among the 26-year-olds. The creditors conclude that there is some truth to the myth that young people cannot handle money.

Especially since it is consumer spending that many people get into debt for - cell phones, consumer electronics, vacations. Gerhard Wagner, managing director of KSV1870 Informations GmbH and master of the KSV's data pool, puts it carefully: The ability to correctly assess one's own financial performance is often not very well developed. Which leads directly to financial education - a topic that is clearly close to the hearts of Vybiral and Wagner. Both go to schools again and again to teach young people how to handle money, and other KSV employees do the same. They also cooperate with various institutions such as the Vienna University of Economics and Business or the “Teach for Austria” educational initiative, they report.

One million new loans

Economics lessons alone are “not timely,” says Vybiral, he sees “potential for improvement” and advocates a weekly lesson in financial education at schools, project-oriented, possibly blocked and subject-related: my cell phone, my first apartment, my first trip, my first loan. Which leads to the core issue - dealing with debt, both from a banking and consumer perspective.

Around 1.1 million loan movements are registered in the KSV's data pool every year, around one million are accounted for by new loan agreements, the rest are changes to contracts such as term extensions or top-ups. First of all, it can be determined that the credit market as a whole, even viewed over decades, is largely stable, says Wagner: Even the financial crisis in Austria - together with new regulations - caused a dent, but not a slump in lending. Since 2008, however, the terms have lengthened and the amounts increased. With the typical consumer loans, terms of 36 months and amounts of 5000 or 10,000 euros now dominate. In the case of mortgage loans, the terms have increased from 300 to 360 months, and the loan amounts have grown in line with real estate prices. The most common loan amounts are 100,000 euros, followed by 150,000 and 200,000 euros.

No more credit for the elderly?

A clear urban-rural divide was also found: The “classic borrower” is therefore city dweller and is consumption-driven. In the countryside, on the other hand, “absolutely necessary” loans are taken out, for example for building a house - then of course larger amounts. However, the evaluation does not confirm other myths about lending: For example, that older people can no longer get a loan. The number of retirement borrowers has even risen massively, and the loan amounts of older people are higher, not least because of their better credit rating on average.

And even at seventy, you can still get a mortgage loan. In the case of consumer financing, however, you have to expect that instead of a loan you will only be granted a higher overdraft. (cka)

("Die Presse", print edition, January 24th, 2020)