'Young adults' debts are not entirely their fault': social cooperative

Baek Seung-hoon, left, the standing director of the Youth Money Habit Training Center, and Kim Young-jae, the head of the center, pose at its office in Anam-dong, Seoul, Wednesday. Korea Times photo by Lee Yeon-woo

By Lee Yeon-woo

Around half of people who sought personal bankruptcy protection last year were in their 20s or 30s, which was the highest rate since the Seoul Bankruptcy Court began compiling such data.

Due to several sensational media stories, young adults who seek financial assistance for an economic recovery have been often criticized for making “irresponsible investments.”

However, Youth Money Habit Training Center, a social cooperative that has been providing consultations, financial education and policy recommendations since 2015, has pushed back against such criticism, stating that “young adults' debts are not entirely their fault.”

“Young adults often bear the burden of both financial and social criticism, with many people blaming them and assuming that it was their choice to accumulate debt. However, the reason many young adults fall into debt is the anxiety that they may fall behind in society,” Kim Young-jae, the head of the center, said in a recent interview with The Korea Times.

According to Rep. Jang Hye-yeong of the minor opposition Justice Party, more than half of young adults under 34 who filed for bankruptcy did so due to debts resulting from the increased cost of living and unemployment. Failed investments accounted for only 0.8 percent.

“For example, a young adult who earns 500,000 won ($376.5) per month from a part-time job at a convenience store applied for a loan. However, the monthly interest on the loan he was seeking was 300,000 won. Should the bank approve his loan request?” said Baek Seung-hoon, the standing director of the center, who also has experience of working on a debt collection team at a domestic savings bank.

“The reasonable answer is no, but unfortunately, it's permitted. When you examine the documentation, it states that his income is greater than his monthly interest. I have observed many young adults in similar situations during my work,” Baek added, highlighting the responsibilities of financial institutions.

The center noted that young adults feel powerless in navigating the financial system, because proper financial education is not provided during their school years.

“That's why continuous education and consultation are also required as well as cash support,” Kim said.

Kim himself accumulated debt during his 20s. Despite his desire to recover economically and his search for assistance, he did not know where to turn to, and the experts who should have helped him gave him a cold reception. He felt like he was being investigated rather than receiving a consultation.

“While basic financial education in schools emphasizes the importance of saving money, it often fails to instill a broader economic perspective in young adults before they enter society. As a result, they lack a foundation or guiding principles for making sound judgments. When someone suggests that a particular product is profitable, for example, they flock to it without fully understanding the details,” Kim said.

The center offers more than 200 financial education classes annually, providing information on how to search for credible sources of information, prevent financial fraud and manage money throughout their lives.

“During times of social crisis, the weakest chain of society struggle the most, including young adults, the elderly, and people with disabilities. However, if society believes that young adults are the ones who can help break through recent hardships, it should support their growth and development so that they can play a crucial role in connecting the past and future,” Baek said.