The Impact of Debt on Families
The rising number of families taking on debt is one effect of the financial crisis. Families are now
resorting to credit once again, such as payday loans, to ease the pressure they're facing.
Reliance on credit contributed to the debt issues of recent years. As expected, families,
particularly those with low incomes, suffer the most due to the current economic situation. The
worst effects of debt were historically offset by welfare payments and relatively stable
employment, but the impact of COVID-19 and the more erratic nature of modern employment
have changed the dynamics of family finances.
The effect of debt on families
Since the beginning of 2020, 3.6 million families have been pushed into debt; this represents
nearly half of all households with children suffering financially and having to borrow money to
survive the economic effects of COVID-19. Parents feel ashamed of not being able to manage
money effectively, as well as feeling they are not in control of their lives and unable to protect
their children. Some effects of this are children missing out on socializing, school trips or
sporting clubs, leaving them to feel isolated from their peers. More worrying is that nine out of
ten families experiencing debt problems said that they had to cut back on essentials such as
food, clothing or heating. When children see their parents distressed by their financial situation,
they can feel a sense of failure for not being able to help, lowering their self-esteem which can
then impact on other areas such as their education. This financial strain can make for a
stressful home environment due to the pressure of a barrage of letters and phone calls, and
even the threat of losing the roof over their head. Because of this, half of families claim that
their intense situation has caused arguments within their family.
How debt affects your mental health
Debt can affect more than just your bank balance. It can affect relationships, social lives and
even the mental health of children who we must remember are living in debt too.
Research found that children growing up in families with debt problems are five times more likely to be unhappy than those in families with no debt trouble, with an estimated 2.4 million children living in families who have fallen into debt, which is a worrying issue.
How to reach out
However, organisations and businesses like X-debt where we can assist in setting up an IVA
- Individual Voluntary Arrangement as well as charities and social groups have come together to minimise this, with volunteers offering consultation, debt solutions, phone calls and a place for people to reach out when they need interaction to talk about the problems they are facing.