More than four million UK consumers have missed bill or loan payments in three or more of the last six months, according to a study by the City watchdog.
The study by the Financial Conduct Authority (FCA) found that 8% were “in difficulty”, while a further 27% were said to be “just about surviving”.
Younger consumers and renters were among the most financially stretched, according to the FCA’s wide-ranging Financial Lives Survey of 13,000 people aged 18 and over.
The study gave an insight into levels of financial vulnerability at a time when inflation is at a five-year high and interest rates look set to rise for the first time in a decade.
Chris Woolard, the FCA’s executive director of strategy and competition, said: “We are in a situation where it’s fair to say that there is a significant group of people who have never experienced a rise in interest rates.
“It does expose the scale of those in difficulty in the younger generation.”
Overall 4.1 million, or 8%, were in the category of being “in difficulty”, with the highest proportion – 13% – among the 25-34 age group.
There was a high rate of employment among this group, but the average wage was lower than for older adults, with many still in the early stages of their career.
These consumers were also big users of consumer credit – especially those with young families.
The study said: “Their fledgling earnings, low savings, and high average debt levels mean that levels of financial resilience are significantly lower among 25-34 year olds than they are in the population as a whole.”
Four-fifths of those in this age group in difficulty were renting and more than half had financially dependent children, it found.
Meanwhile, across the UK, nearly half of renters said they would struggle to meet a rent rise of less than a hundred pounds a month.
Other highlights of the study showed that single parents aged 18-34 were most likely to use high-cost loans – at 17% compared to the UK average of 6%.
Meanwhile just 35% of those aged 45 to 54 said they had given a great deal of thought to how they manage in retirement.
The study also found that 24% of UK adults have little or no confidence in how they manage their money, with 46% saying they have little or no knowledge about financial matters.
It also said that half of UK adults, or 25.6 million were potentially vulnerable to suffering disproportionately if something goes wrong in their lives – meaning they may be less able to engage with financial services.