Certain types of debt incurred by parents can have adverse effects on children’s socio-emotional well-being, according to a new study by researchers at the University of Wisconsin at Madison and Dartmouth published by the journal Pediatrics. The study sheds new light on the link between debt and family well-being, as previous research on debt has generally focused on how debt affects adult mental health and well-being and n have yet to explore how parental debt can impact a child’s health. well-being.
According to the results, children whose parents had higher levels of mortgage and student debt had better socio-emotional well-being with fewer behavioral problems than children whose parents had less mortgage and student debt. The results indicate that children can benefit from an environment in which their parents own a home and / or have higher levels of education. Yet children whose parents had higher levels or increases in unsecured debt (credit card or other types of non-asset debt, such as medical debt and payday loans) were likely to have a poorer socio-emotional well-being. High levels of unsecured debt can create stress or anxiety in parents, which can hamper their ability to adopt good parenting behaviors and, subsequently, affect the well-being of their child (ren).
The study was led by Lawrence M. Berger, director of the Institute for Research on Poverty and professor and director of the doctoral program at the School of Social Work at the University of Wisconsin-Madison, and Jason N. Houle , assistant professor of sociology at Dartmouth. .
“It’s intuitive to think that debt that can help you improve your social status in life and make investments – taking out student loans to go to college or taking out a mortgage to buy a house can lead to better results, while taking on debt that is unrelated to those investments (like credit card debt), can be more damaging. This is what we find. Overall, our results support the narrative that debt is a “double-edged sword,” as my Ohio State University colleague Rachel Dwyer puts it. Debt can bridge the gap between your family’s immediate economic resources and the cost of assets and therefore can be a valuable resource, but ultimately it must be repaid with interest and sometimes with a lot of interest when it sinks. ‘this is unsecured debt,’ explained Houle.
Based on population-based longitudinal data from the National Longitudinal Study of Youth 1979 and Children of the NLSY-79, researchers studied more than 9,000 children (aged 5 to 14) and their mothers each year or all. the two years from 1986 to 2008 up to more than 29,000 child-years records.
To measure children’s socio-emotional well-being, the study looked at a child’s total score on the Behavior Problems Index (BPI), a set of 28 questions to mothers that examines frequency and severity behavior of children four years and older. ; the total score was age-standardized at 3-month intervals to have a mean of 0 and a standard deviation (SD) score of 1.
The study measures the total personal debt that a parent may have that was not incurred to have a business, including: real estate debt (mortgage or home equity loans); student loan debt (student loans); auto debt (loans to buy a vehicle); and unsecured debt, such as credit card debt, medical debt, payday loans, and other types of non-asset debt.
An important strength of the study is that it compares the same families over time and examines how children’s behavioral issues change as their parents get into and out of debt during their childhood, rather than comparing different families who have different levels of debt. at one point.
Houle notes: “Most of the time in the social sciences, for a question like this, we will use survey data and statistical analysis to make comparisons. If we are interested in how debt relates to the well-being of children, we will compare children from families with high debt to families with less debt. If children from heavily indebted families fare worse than children from less indebted families, we could argue that debt might explain why. One problem with this traditional analysis is that we compare different families (what we would call an “between families” comparison), and families are different for many reasons – correlation is not causation, as they say. What we are doing in this study is a little different. That is, we follow the same families over time and basically ask: what happens to children in families when their parents incur (or pay off) debts over time. So, we’re basically doing an “intra-family” comparison. Instead of comparing different families to each other, we compare families to themselves over time. This is by no means a perfect solution to the ‘correlation is not causation’ problem, but it can be a more compelling argument and suggests that if a family incurs a lot of unsecured debt, their children may feel the consequences. of this debt. . ‘
The results indicated the following:
- -Children whose parents are in debt on average had greater socio-emotional well-being with 0.21 SD fewer behavior problems.
-Children whose parents had unsecured debt had 0.12 SD more behavior problems than those with unsecured debt. Parents with unsecured debt in the study owed an average total of $ 10,000 in unsecured debt and had higher total debt, education, and auto debt levels, but less mortgage debt than those without debt. unsecured, indicating that more advantaged people were likely to take on more debt because they had better access to credit.
-If the parents had $ 5,000 in unsecured debt and this number were to be increased to the sample average of $ 10,000 in unsecured debt, this would result in a 0.5 SD increase in problems behavior of children, a substantial impact on the well-being of children.
According to the Federal Reserve Bank of New York’s Household Debt and Credit Report, as of September 30, 2015, for the third quarter of 2015, total household debt was $ 12.0 trillion. With today’s cost of living combined with the deregulation of financial policies that may have perpetuated the increase in debt, some families are now taking on high levels of unsecured debt to join the two. ends without realizing the impact it can have on the good of their children – being. The findings provide an opportunity to educate families about the risks that may be associated with high levels of unsecured debt.
“I think it’s common to assume that those who are struggling with debt are those who have made bad financial decisions or are irresponsible, but research shows the reality is quite different,” Houle said. “For those who have a lot of credit card debt, or who are buried in medical debt or have payday loans – for many, this is the only choice they have. In an era when wages have stagnated and costs have risen, but credit has become more readily available (largely thanks to financial deregulation policies at the state and federal levels over the past three decades), families go into debt to make ends meet and keep their heads above water. Concerned about the positive and negative aspects of debt, we should ask ourselves: 1) how all this credit became available in the first place; and 2) why families borrow. However, on a more immediate level, if some forms of debt are stressful for families and their children, we might wonder how we can alleviate some of that stress. While this is beyond the scope of this study, others have indicated that financial counseling or financial education are potential short-term solutions. , a ref An error in any of these services may help in the short term, but it does not solve larger structural problems. “