On the cost of living crisis: let’s empower young people with understanding and choice.

Last week the FCA shared a timely warning reminding CEOs of credit brokers and firms providing high-cost lending products about the UK’s growing cost of living crisis and their resultant focus on spotting any predatory behaviour towards the vulnerable. I can’t wait for Prograd to be the broker re-defining the standards for consumers.

Young people are more likely to turn to borrowing for help

A recent report published by the ONS entitled “The impact of increased cost of living on adults across Great Britain: November 2021 to March 2022” makes for sobering but essential reading.

Around 8 in 10 (83%) adults reported an increase in their cost of living in March 2022, up from 6 in 10 in November 2021, with the most commonly cited drivers being the rising costs of day-to-day essentials like food shopping (90%) and gas or electricity bills (79%).

Beyond the scale of the challenge, the most interesting insights to us at Prograd were those relating to what people were actually doing in response to it.

The youngest of the adult age groups reported rising costs at the lowest rates at 42% and 69% for 16–24-year-olds and 25–35-year olds. And yet, when asked what they were doing in response, they reported two of the three highest rates of turning to “Borrowing from a friend or family” or “Using credit more than usual, for example, credit cards, loans or overdrafts” of all the age groups at 27% and 39% respectively.

Despite representing only a quarter of those that reported rising costs, under-35-year-olds represented half of those reporting turning to borrowing more.

Notionally, these findings make sense. Young people are less likely to have children and other large sources of financial outgoings than other age groups, and so will feel less of a squeeze. At the same time, they’ve accrued less savings that they can dip into when times are tough and are receiving less income to support their spending habits than their older counterparts, resulting in a smaller cushion to any meaningful increase in everyday costs.

A caution from the Financial Conduct Authority

In a letter addressed to CEOs of credit brokers and lenders, Sheldon Mills, Executive Director of the FCA, noted the likelihood of greater demand for credit, including short-term credit, in response to the cost of living crisis.

Mills stressed the importance of ensuring financial promotions are “clear, fair and not misleading” in the wake of millions facing “the biggest cost of living crisis in more than a decade”. The FCA has recognised that some organisations may shirk a responsibility to ensure they “do not exploit the cost of living crisis to promote their services”.

Prograd: providing understanding and options

With more young people likely to turn to borrowing of some form, it’s never been more important to empower them with a really strong understanding of i) how borrowing — in all of its different forms — actually works and ii) what their options are besides borrowing.

We’re proud to say that this has been at the core of our proposition from day dot —long before the on-set of the current cost of living crisis. We curate sustainable options on behalf of an individual, their need for an amount of money and their specific circumstances, whether that’s through earning, borrowing or saving.

What’s more, we’re launching a dedicated Prograd “Learn” page, hosting short-form-video-first content on everything from credit jargon, like “Annual Percentage Rate” or “Balance Transfer Credit Card”, to breaking down what alternatives there are to borrowing for young people.

Importantly, this content doesn’t just sit in the Learn space — we’ve baked it into our core user journey. Any user coming through our site will see short-form explainer content alongside the earning or borrowing options actually displayed to them. Because that’s how it should be.

Prograd was born out of my and my co-founder’s really difficult experience with understanding what our options were for financing our education. We’re incredibly excited to start providing the understanding and access we wish we had to others — particularly in these difficult times.

Investor, financial organisation or just someone who’s interested in what we’re up to? Get in touch: ethan@prograd.uk