Irish League of Credit Union survey finds more than a third of families in debt

Posted on: 30 Jul 2018

• Survey identifies rise in the number of parents in debt due to back-to-school related costs

• Increasing numbers turning to moneylenders to cope with the back-to-school spend

• One third forced to deny children certain back to school items because they cannot afford them

• Overall costs are down – falling to €999 per primary school child and €1,379 per secondary school child.

• However, almost half of parents (46%) say costs remain the biggest back-to-school related worry

Well over a third (36%) of parents in Ireland say they are getting into debt to cover back-to-school costs. This is a noticeable increase on the 29% who reported being in debt last year. Parents of primary school children are, on average, in debt of €367 – up from €345 in 2017. For secondary school parents, the average debt reported is €443 – compared with €415 last year. The findings were revealed in the annual school-costs survey commissioned by the Irish League of Credit Unions (ILCU).

67% of parents in the national study say back-to-school costs are a financial burden. Almost half (46%) say that costs are their biggest back-to-school related worry, well ahead of concern that children won’t settle or make friends (15%).  Four in ten say they are under pressure to buy branded goods and other items for their children. This figure was higher for parents of secondary-school children with over half (54%) feeling the pressure, compared with 39% of parents of primary school children.

Those admitting they will be forced to deny their children certain school items has also increased, rising from 25% in 2017 to almost one third (31%) this year. Of this group, four in ten say they cannot afford new school shoes for their children, while seven in ten say extracurricular activities will be cut from the budget.

In general, just over a third of parents say they will have to sacrifice spending on family holidays to meet school costs. 22% say they will have to cut spending on household bills and 15% say spending on food will have to suffer.

The study found however, that overall, costs have fallen somewhat since last year. Parents say they are spending €999 per primary-school child, a €49 decrease on 2017. For secondary school-children, parents say the cost per child has fallen €22 to €1,379. In general, the decrease was due mainly to falls in the prices for extracurricular activities, transport and after-school care.

According to parents, the biggest spend for primary school children is again extra-curricular activities at €153 per child, followed by school lunches at €142 and after-school care at €140. For secondary-school, parents say the most expensive item is again books at €200, followed by uniforms at €179 and school lunches and transport both costing €175 each. (See figure 1 below for more detail).

Of concern is the finding that of those parents in debt, more than a quarter (27%) say they have turned to a moneylender in an effort to cope with back-to-school costs. This is up from 20% last year. Of this group in debt, three in ten said they have borrowed between €400 and €500– while more than a quarter said they had borrowed over €800.

When asked why their preferred option was a moneylender, 46% of this group said they felt they would be guaranteed the money and that the approval processes in banks and credit unions would be more difficult. 42% said they felt they had no other option because they had a bad credit history. Of concern also is the fact that a significant number of this group (77%) said they will use a moneylender again this year to cover the back-to-school spend.

Commenting on these findings, Paul Bailey, ILCU Head of Marketing and Communications, said, “Despite the current recovery of our economy, families continue to struggle to cope with the cost of sending their children to school. It’s somewhat encouraging that parents are reporting that costs have reduced a little since last year, but at the same time we are seeing increasing numbers of parents saying they are in debt, and a rise in the numbers saying they are turning to moneylenders. I would really encourage these parents to talk to their local credit union, even where they feel they have a poor credit history. Credit unions are responsible lenders who will ensure that their members do not borrow beyond their means and will work with them so that repayments are realistic for their circumstances.”

Mr Bailey continued “Using moneylenders, some who charge APR rates as high as 188%* will lead to a recurring cycle of unnecessary debt and irrational borrowing, and we would seriously urge parents to reconsider going this route. A number of our credit unions offer the Personal Micro-Credit Scheme or ‘It Makes Sense’ loan which was specifically designed to assist social welfare recipients who feel they have no option but to borrow from a moneylender. Our welcoming staff are always on-hand to answer any queries in relation to this loan, and to offer guidance on household budgeting and financial planning.” 

Almost seven in ten parents (69%) say that Irish schools are not doing enough to keep costs down. This has dropped however from 76% last year. When asked how schools could do more to help parents, 32% said reducing the price of books or introducing a book rental scheme. 22% said the option of generic uniforms or even free uniforms would help.

* Central Bank of Ireland Register of Moneylenders, July 2018.

For more information on the Personal Micro-Credit Scheme see http://itmakessenseloan.ie/