Financial Illiteracy and Soaring Debt Weighs on United Kingdom

A startling new UK report details skyrocketing levels of personal debt that has reached a level that is nearly as high as Britain's national economic output and that is resulting in mental and other health concerns throughout the United Kingdom.  The report, named “Maxed Out: Serious Personal Debt in Britain,” notes that thousands are becoming homeless each year as a result of their mortgage or rent debts, while nearly fifty percent of low income households devoted over twenty-five percent of their total income on the repayment of their loans.

The study and report was overseen by Chris Pond, the former Labour work and pensions minister, who found a range of eye-opening conclusions, including that consumer debt, now at £158bn, has trebled since 1993, and outstanding debt on credit cards, now at £55.6bn, has nearly trebled since 1998.

The higher levels of consumer debt have occurred in parallel with increasing levels of financial illiteracy, which has been the result of more complex financial products being launched into the market without sufficient education to enable consumers to make good financial decisions.  While more financial education initiatives are launching in the UK on a frequent basis, it is difficult for such programs to complete with the financial and other resources being devoted to the marketing of new financial products, such as mortgages, credit cards, car loans and bank accounts.

What is even more troubling than the statistics themselves is the impact of financial illiteracy and debt on UK individuals and families.  As real incomes have dropped and as the cost of living has risen, consumer debt in the UK continues to grow.  As a result, mental and health wellness are similarly deteriorating, with marked increases reported in mental disorders, levels of stress, relationship troubles, and other areas that contribute directly to emotional and mental strain.  It is further reported that the mental and emotional suffering often takes a long period of time to overcome, even as an individual’s financial situation improves.

The rise consumer debt and the associated mental and other health issues that are being seen in the UK are similar to challenges currently experienced by other countries and regions throughout the world.  This underscores the continued need for improved financial literacy programs and initiatives designed to empower consumers to best understand their financial affairs and make better informed personal finance decisions.  With such initiatives, we can also improve our mental, emotional and overall health that is tied so closely to the debt we carry.