A new study suggests that children whose parents have certain types of financial debt could be more likely to have problems with their behavior.
Agata Blaszczak-Boxe, writing for LiveScience, reports that children whose parents had credit card debt or unpaid medical bills experienced behavioral troubles more often than young people whose parents did not have those types of debt.
Secured debt, such as a mortgage or a car loan, tends to be less expensive than unsecured debt because people usually pay larger interest rates for unsecured debt, and the expectation is that it will be paid over a shorter period.
Study author Lawrence M. Berger, a professor of social work at the University of Wisconsin-Madison, said this type of debt can cause stress in parents. Stress and anxiety can affect the way people parent, which in turn can affect their children's state of mind.
The mothers of approximately 9,000 kids were asked about the behavior of their 5- to 14-year-old children. Typical questions included whether their youngsters were ever withdrawn, depressed, or aggressive.
Researchers also looked at parents' financial standings. If they had debt, they were asked to describe the types of debt they had. In the analysis, the types of debt the researchers included were unsecured debt, like medical debt, credit card debt, and payday loans, and secured debt such as student loans, car loans, and home mortgages.
They found that parents who had unsecured debt had an average amount of $10,000, which was a higher level of total debt than parents with no unsecured debt. And having secured debt was linked to lower levels of problems in the behavior of children.
Along with having lower interest rates and a more foreseeable payoff schedule, secured debt is associated with investing in assets. The results of the study seem to show that parents should attempt to avoid high-fee, high-interest rate loans as much as possible, said Berger.
"It makes sense that taking on debt for 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. Hence, taking on unsecured debt, such as credit card debt or payday loans, that are not tied to such investments may not," he explained.
The findings of the study were published in the journal Pediatrics, but researchers were clear that the research did not show a direct cause-and-effect between parents' debt and children's behavior, writes Jackie Pasaol of the Parent Herald.
The data for the study came from a national sample of subjects recruited as children in 1979 and the children of those participants who started to be included in 1986. The entire group was followed through 2008 for the new analysis.
"What is not clear from our work is whether there are particular thresholds, either in absolute terms or relative to income or earnings at which we should particularly worry about the influence of debt on child development," Berger said.
Patricia Drentea of the University of Alabama at Birmingham, who was not involved in the research, said parents might want to be careful not to discuss financial problems in front of their kids. They also need to keep from fighting about money in front of their children, she added.
Reuters reports that Berger noted that wages have decreased or remained stable for the past few decades, particularly for blue-collar workers. At the same time, credit has become extremely easy to get largely because of financial deregulatory policies.
Though the analysis did not comment on this issue, Berger believes that financial education and counseling could help families create strategies for reducing debt and repaying it as expeditiously as possible.