Parental debt may be a “double-edged” sword when it comes to how it affects children’s behavior, according to a new study. The research, published online Jan. 21 in the journal Pediatrics, found that debts like mortgages and student loans are positively linked to a child’s emotional well-being, while unsecured debt like credit cards is associated with behavior problems.
“Our findings underscore that debt can be both positive and negative, depending on what it is being used for and the price or cost at which it is borrowed in terms of interest rates, fees and the like,” lead author Lawrence M. Berger, PhD, director of the Institute for Research on Poverty at the University of Wisconsin, told Reuters Health in an email.
“It makes sense that taking on debt for a specific investments can be beneficial – for example, taking on student loans to go to college or a mortgage to buy a home may lead to better social and economic outcomes, whereas taking on unsecured debt, such as credit cards or payday loans, that is not tied to such investments may not,” Berger added.
For the study, Berger and his colleagues analyzed data from two U.S. studies and tracked 9,011 children ages 5 to 14 and their mothers, who were interviewed about their child’s behavior every two years from 1986 and 2008. The researchers divided total parental debt into four categories: home, education, auto and unsecured, which included credit cards; money owed to individuals, businesses, and banks (other than mortgages); and medical debt.
Findings showed that children whose parents had some debt exhibited better social and emotional well-being than those whose parents had no debt at all. Having debt was more common among parents who were white, American-born, better educated or married. The researchers attributed this to their greater ability to borrow in the first place. However, findings also showed that parents who had more overall debt – regardless of the type – were more likely to have children with behavior issues than those who had less overall debt.
The research team also found that unsecured debt had the greatest negative impact on the kids’ social and emotional well-being. Unlike mortgages, which can translate into access to better neighborhoods or better schools, unsecured debt such as unpaid credit card bills and payday loans can cause parents increased stress and anxiety that results in children who may have behavioral issues.
“It makes sense that the type of debt you have makes a difference,” Nadine Kaslow, PhD, a professor in the department of psychiatry and behavioral sciences at the Emory University School of Medicine, told HealthDay. “And financial stress related to relatively risky spending moves, like credit card debt, is likely to be higher than stress related to more normative spending, like buying a house,” added Kaslow, who is the former president of the American Psychological Association.
However, study co-author Berger recognizes circumstances often prevent parents from avoiding unsecured debt. “It may be common to think about those struggling with debt as having made poor financial decisions or having over-spent,” he told Reuters Health. “However, many of those with credit card debt, medical debt and payday loans took on such debt because they lacked other financial alternatives. Thus, many individuals and families are taking on debt just to stay afloat.”
Although not part of the study’s scope, Berger suggested that parents overwhelmed by debt could benefit from financial counseling that would help them put together strategies for reducing the cost of debt and paying off balances as efficiently as possible.