Children’s social and emotional well-being varies according to the size and type of debts their parents take on, according to a study that – for the first time – sheds new light on the link between debt and family well-being by focusing on children as opposed to adults.
A paper on the study – by Lawrence M. Berger, professor in the social work department of the University of Wisconsin-Madison and director of the Institute for Research on Poverty, also in Madison, and Jason N. Houle, assistant professor of sociology at Dartmouth College in Hanover, NH – is published in the journal Pediatrics.
The study is timely, following news that in the third quarter of 2015, household debt in the US climbed to $12.07 trillion – the highest it has been since 2010 – driven mainly by increased mortgage lending, auto loans, student loans and credit cards, according to the Federal Reserve Bank of New York’s Household Debt and Credit Report.
In the light of this US household debt mountain, the researchers hope their findings will help to educate families about the effect that taking on certain types of debt may be having on children.
Using data from studies that followed over 9,000 children and their mothers for about 20 years, the study estimates links between children’s social and emotional well-being and parental debt.
The authors looked at links with total debt and also links with different types of debt, such as home mortgage, student loan, auto loan and unsecured debt.
The results show that greater total parental debt is associated with poorer child social and emotional well-being. However, they also show this association varies by type of debt.
Specifically, higher amounts of debt due to home mortgage and student loans is linked to greater social and emotional well-being in children, while higher levels and increases in unsecured debt is linked with reductions in children’s social and emotional well-being.
Unsecured debt is debt that is not secured by assets – for example, credit card debt, medical debt and payday loans.
While the study did not examine cause and effect, one interpretation is that children fare better in families where parents own their home and have higher levels of education, and fare worse in families where parents are burdened by unsecured debt that may create stress or anxiety, which, in turn, undermines their parenting.
Prof. Houle says the results appear to confirm this:
“It makes intuitive sense that debt that can help you improve your social status in life and make investments – taking on student loans to go to college or taking on a mortgage to buy a home might lead to better outcomes, while taking on debt that is not tied to these investments (such as credit card debt), may be more harmful.”
He adds that while debt can bridge a gap in the family’s finances, it has to be repaid eventually – and with interest – and in the case of unsecured debt, that interest can be very great.
An important feature of the study is that the data comes from following families over a period of time – as they plunge in and out of debt over the course of their children’s childhood – rather than being drawn from a cross-section of families in different debt situations at the same point in time.
Prof. Houle says that because their findings come from this “within family” comparison, rather than the “between family” comparison, they make a compelling case for arguing that “if a family takes on a great deal of unsecured debt, their children may feel the consequences of that debt.”
Looking at the implications of the study, he says we are in an era where wages have stagnated, costs have risen, yet credit is more readily available.
Prof. Houle notes how it is common to assume that families struggling with debt are ones who make poor financial decisions or who behave irresponsibly, but asserts that the research points to a different reality. “Families are going into debt to help make ends meet and keep their head above water,” he adds.
If we want to find out how positives and negatives of debt affect us, we need answers to questions like: how did all this credit become available in the first place and why are families borrowing? And, if debt causes stress to families and affects children’s social and emotional well-being, then perhaps we should be looking at potential short-term solutions, such as financial counseling or financial education, he notes, and concludes:
“In the confines of a pediatrician’s office, a referral to one of these services may help in the short-term, but it doesn’t solve the larger, structural issues.”
The data for the analysis came from two population-based longitudinal studies: the National Longitudinal Study of Youth 1979 Cohort and Children of the National Longitudinal Study of Youth 1979 Cohort. Altogether, the analysis sample covered 29,318 child-year observations of 9,011 children (aged 5-14 years) and their mothers, with data taken annually or every 2 years from 1986-2008.
To assess social and emotional well-being, the researchers used scores from the Behavior Problems Index responses filled by the children’s mothers either every year or every 2 years. The Index taps 28 items of child problem behaviors, such as antisocial “acting out,” hyperactive behavior and anxiety/depressed behavior.
Meanwhile, Medical News Today recently learned about another study that showed children raised in poverty are more likely to experience changes in brain connectivity that place them at higher risk of depression, compared with peers from more affluent backgrounds.