Figures released by the Insolvency Service revealed that there were 30,936 individuals entering either bankruptcy (4,228), a debt relief order (6,752) or an individual voluntary arrangement (19,956) in the second quarter of 2019.
Law firm RSM analysed the data and found almost 2,000 people aged 18-25 entered an insolvency process in Q2 2019, compared to just 208 in the first quarter of 2016.
This means that, of the total number of people entering insolvency in Q2 2019, 6.5% were aged 18-25.
A staggering increase from just 1% of the total in 2016.
Fighting the issue
Keith Richards, chief executive of the Personal Finance Society (PFS), told International Adviser: “The importance of financial education cannot be over emphasised or spoken of often enough, especially considering issues such as the rise in numbers of 18-25-year-old in the throes of complete insolvency, the lowest savings ratios since records began, and the ever increasing threat of financial scams.
“Also, I believe that early education is the most significant factor for financial resilience in later life and the PFS have been a long-term champion for financial education to become a key part of the national curriculum in the UK.”
He continued: “In addressing these concerns, the PFS have set up the MoneyPlan, a pro-bono initiative which partners financial advisers with local Citizens Advice to offer free financial guidance to those who wouldn’t ordinarily be able to access professional advice,” Richards added. “We have also launched key education programmes in support of financial education.
“These are the ‘My Personal Finance Skills’ initiative for young people; a programme which uses gamification to demonstrate key financial scenarios, and then guides students through the different methods of managing them.”
Alec Pillmoor, personal insolvency partner at RSM, said: “Of greatest concern is the rise in personal insolvencies among young adults. Back in 2016, insolvencies among adults under 25 only accounted for 1% of the total.
“Our research shows that this has risen to around 6.5% today.
“In this climate of low interest rates and relatively easy access to credit, it is entirely feasible that young people without financial experience or literacy may be more susceptible to the temptations of easy money.”
The lack of financial literacy in young people is becoming a recurring theme.
In June, IA reported on a survey by digital wealth manager Nutmeg, which found that 60% of UK teachers believe students leave school with a poor level of financial understanding.