Zeidy found her way out of debt
17 May 2018
In the Dutch city of The Hague, almost one in five households are struggling with debt. It’s a pattern that mirrors the rest of the western world, where the number of people with problematic debts is growing fast. In this third-largest city in the Netherlands, the organisation Schuldenlab070 is working to help fight this.
“I had five telephone subscriptions and a loan,” says Shanti (22). “I didn’t want to open my mail anymore. That’s how I got into debt.”
Then there’s Zeidy, a 22-year-old mother of two-year-old twins, who became homeless when she was 18. No one ever taught her anything about money at school.
And they’re not the only ones.
There are thousands of households in The Hague that can’t pay their debts. And that group is growing, affecting people in both low and top income groups, and bringing consequences for society.
Enter Schuldenlab070, set up in 2016. A group of about 25 public and private parties joined together and are currently working to help stop this growing trend. From government to housing corporations, insurers and banks (including ING), all deal with debt problems on a daily basis in one way or another. And all recognise that these problems are so large and structural that hard work has to be done to find solutions at a social level.
Schuldenlab070 works to solve people’s financial problems and then educate them so that they don’t happen again. The Youth Perspective Fund (YPF), one of their projects, offers youth from 18 to 27 years old intense one-on-one training on all aspects of their lives, including finances.
In a short film ‘The way out of debt’, Shanti and Zeidy openly talk about their problems - how they got them, and how they are fighting their way back in life with the help of the YPF’s specialised staff.
Part of a bigger trend
The debt problem in The Hague is, unfortunately, not unique. In the US for example, while the amount of debt declined temporarily after the 2008 financial crisis, there’s an unmistakable rise happening now.
According to the Center for Microeconomic Data, part of the Federal Reserve Bank of New York, this is mostly attributable to people spending with credit cards and taking loans for cars. Americans have a total $3.82 trillion of non-housing debt. Never before in history was this amount so high.
The UK is comparable, with consumer debts per household increasing at a higher rate than incomes are rising. The most recent study shows that the average debt in the UK is around 140 percent of disposable income. Shocking? It’s actually quite average according to the OECD. Countries such as Denmark and the Netherlands come close to 300 percent.
Of course, not every kind of debt is the same: local regulations on student loans, mortgages and pension provision affect these figures. But no matter how you look at it, the trend is clear: in the western world, the amount of consumer debt is growing at a strong pace.
Meanwhile, a large group of people hardly have a financial buffer. The annual ING International Survey Savings charts the savings behaviour of consumers. A recent survey shows that a quarter of all Europeans don’t have savings. The same survey in 2017 showed that one-third of the respondents had limited financial reserves – less than three times their monthly income, which experts generally advise.
Internationally, more and more people are in a situation where a small setback can have major consequences. The story of 22-year-old Zeida is a bitter proof of that. While she’s fortunate to receive help from Schuldenlab070, many others struggle alone to keep their heads above water.
The reason that people’s financial situation is becoming increasingly unstable isn’t clear. Researchers point to a large number of different factors, like lack of financial education and an excess of financial temptation.
Financial products are becoming increasingly complex and spending money is easier than ever. Sometimes we make big financial decisions in a fraction of a second and hardly consider the consequences.
What do scientists agree on? That we know very little about how we make decisions, especially financial ones. And one thing is certain: we are more irrational than we think...