Problem debt, buy now pay later & young adults in Aotearoa New Zealand

In the AUT Business School, especially the Department of Finance and Auckland Centre for Financial Research, we have extensive research expertise in personal finance, KiwiSaver, financial literacy, and financial inclusion. On 6th September our researchers Professor Aaron Gilbert and Dr Ayesha Scott in conversation with Sorted’s Tom Hartmann, discussed how Kiwi young adults use debt, buy now pay later, and if financial education is the answer.

Problem debt and over-indebtedness have serious well-being consequences, with young adults (aged 18-34 years) at acute risk. We assessed young adults’ debt use, and their attitudes to debt – focussing on buy now pay later – to see whether this contributes to problem debt and investigate if financial education solves the problem.

We presented a comprehensive overview of young adult debt use, including buy now pay later, and strong evidence that buy now pay later is contributing to problem debt and over-indebtedness above and beyond other debt types.

We highlighted that 1 in 6 young adults are at severe risk of over-indebtedness, if they are not already facing unmanageable debt, equating to over 190,000 Kiwi.

Read the full report

You can also find our thoughts on buy now pay later regulation (or the lack of it!) via The Conversation, here.

Does financial education make a difference? We found mixed results: some BNPL behaviours (incurring late fees) improve, and others do not. Importantly, financial education did not increase a respondent’s likelihood of using BNPL wisely, and evidence seemed to point to an increase in confidence but not skill in handling the debt product.