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More young people getting deep into debt

Fewer than four out of every 10 of last year’s successful matriculants are going to get jobs immediately, which means that close to 500 000 unemployed youths will be joining the ranks of the unemployed this year.

According to trade union Soli­darity, the job market is tighter now than it has been for many years and only those candidates with decent symbols and desirable subjects such as maths, science and accounting stand a real chance of getting employed early in the year.

And, according to Neil Roets, chief executive of debt manage­ment firm Debt Rescue, the official unemployment figure of 25.5 per­cent is reflected in the fact that the number of young individuals who get over-indebted and then have to seek help is growing exponentially.

“In the last five years we have seen a steady increase in the num­ber of young people who have joined the ranks of the unemployed, and this year is not going to be any different,” he says.

“And, if we take into account the number of workers who have lost hope and are not actively looking for a job, the actual unemployment figure is probably closer to 40 per­cent, Roets says.

A typical scenario is that a matriculant might get a low-paying job with a fast food outlet or some­thing similar.

Lured by the multitude of “easy” loans made available by fi­nancial institutions and retail out­lets – many of whom do not do an adequate affordability check – they borrow to the point where they be­come over-indebted and unable to service their debt.

The education system is as much to blame as the financial in­stitutions themselves for failing to ensure that young people are finan­cially literate.
They simply do not fully under­stand the implications of entering into a credit agreement.

They borrow money – usually at high interest rates – or buy furni­ture or luxury goods on extended- period credit agreements without realising how much of their repay­ments go to servicing the interest on the loan.

Roets points out that the rate at which people are getting them­selves into financial trouble is more than doubling every year.

“In our own business we have seen double-digit growth for the past five years as a result of con­sumers needing to go under debt re­view to protect themselves from avaricious debt collectors who want to seize their property to pay off their debt.”

Debt counselling remains the best way to protect your assets from debt collectors, because once a per­son has been legally placed under debt review, these assets are fully protected.

According to Roets, the grim reality is that the majority of consumers owed some 75 percent of their pay cheques to creditors for loans, usually with very high inter­est rates attached to them.

“Many South Africans have be­come totally dependent of credit, and without help, will probably never be able to pay back what they owe,” he concludes.

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