The removal of many Finns' payment default entries shortly after the credit information law amendment came into effect in December 2022 was a positive development. However, an analysis of debt collection data by Intrum reveals that the proportion of heavily indebted individuals among all debtors has been steadily increasing since 2019. The most significant growth has been observed in the age group of 18-24-year-olds.

The reasons and consequences of indebtedness are diverse, but debt issues can be prevented by directing early assistance and support to children, young people, and their parents.

The concerning trend of Finnish households' debt accumulation since 2019 continues. Intrum analyzed the debt development of Finns over the past four years (2019-2022). Last year's results indicated an increase in economic inequality during the pandemic, and the situation has not improved. In 2022, the proportion of heavily indebted individuals in debt collection assignments rose by 17.6% compared to 2019.

Changes in the proportion of heavily indebted individuals by age group. Among young adults, the proportion of heavily indebted individuals has increased relative to both the same age group and all age groups. In 2019, 9% of young adults targeted for debt collection were heavily indebted, while in 2022, this figure rose to 22%. Across all age groups, 34% were classified as heavily indebted.

The number of debt collection assignments and the associated debt amounts have also increased, particularly in the 18-24 age group. The outstanding debts primarily involve the initial purchases made by young individuals, such as phone and telecommunications services, electricity, healthcare, and also the finance industry. This indicates that young adults' incomes are insufficient to cover all daily expenses, and purchases are financed through credit, which, for one reason or another, cannot be repaid as planned.

"Taking out loans itself is not inherently wrong. It enables many things, such as education or home acquisition. However, loans should be taken only when one knows they can handle the repayment. Young people may be overly optimistic about their repayment capacity and may not understand that loan repayment must be managed even if their financial situation deteriorates. They may also fail to critically examine their consumption habits," says Reetta Lehessaari, Head of Collection Services at Intrum.

Minna Markkanen, Director of the Guarantee Foundation, emphasizes the need for a deeper examination of the causes of indebtedness among young adults, considering their diverse backgrounds and life situations.

"We also need a better understanding of the many factors underlying debt problems, such as the life situations of young people, intergenerational poverty, coping with scarcity, the social pressures created by our consumption culture, and the effects of inflation," Markkanen states.

The burden of heavily indebted individuals continues to increase, requiring attention to financial literacy and addressing the root causes of over-indebtedness.

While the growth of heavily indebted individuals slightly subsided in 2021, it resumed an upward trajectory last year. Despite this, the increase in the proportion of heavily indebted individuals among all debtors has been continuous since 2019. The growth has been particularly significant among the age groups of 18-24-year-olds and those over 80. At the same time, the total number of debtors has decreased between 2019 and 2022, meaning that the distress of financially vulnerable debtors deepens, making it increasingly difficult to get rid of debts.

"The development is concerning. Debts are accumulating more among individuals who were already in debt, as well as among economically vulnerable young adults and elderly individuals. There may not have been sufficient consideration of the impact of inflation and rising interest rates in personal financial planning, leading to

increased debt burdens. Additionally, the COVID-19 pandemic has exacerbated the situation for many individuals, especially young adults, who have faced job losses, reduced income, and increased financial instability.

To address the growing issue of indebtedness among young adults, experts emphasize the importance of early intervention and support. They argue that efforts should be made to provide financial education and guidance to children, young people, and their parents. By promoting financial literacy and responsible financial habits from an early age, it is hoped that young adults will have a better understanding of managing their finances and making informed decisions about borrowing and spending.

Furthermore, there is a need for a comprehensive examination of the underlying causes of young adults' indebtedness. Factors such as intergenerational poverty, coping with scarcity, social pressures related to consumer culture, and the impact of inflation should be taken into account. This deeper understanding can inform the development of targeted interventions and support programs that address the root causes of over-indebtedness among young adults.

In addition to educational initiatives, it is crucial to consider measures that promote responsible lending practices and consumer protection. Financial institutions should ensure that young adults have access to clear and transparent information about loans and credit products, including interest rates, repayment terms, and potential risks. Implementing stricter regulations on lending to vulnerable populations, such as young adults with limited financial resources, could help prevent excessive borrowing and reduce the risk of falling into debt traps.

The government and relevant stakeholders should collaborate to create a holistic approach to tackle the issue. This approach may include a combination of financial education programs, targeted support services, consumer protection measures, and policies aimed at addressing income inequality and economic disparities. By adopting a multi-faceted strategy, it is possible to mitigate the rising levels of debt among young adults and ensure their long-term financial well-being.

In conclusion, the increasing debt troubles among young adults, particularly in the age group of 18-24-year-olds, call for urgent action. Early intervention, financial education, and support are crucial in equipping young adults with the necessary knowledge and skills to manage their finances responsibly. Furthermore, a comprehensive examination of the underlying causes and the implementation of measures to promote responsible lending and consumer protection are vital to prevent financial problems among young adults. Through collaborative efforts, it is possible to address this pressing issue and foster a financially resilient future for young adults in Finland.