Is Your Debt Hurting Your Kids?

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A new study indicates that parental debt impacts a child's well-being -- for better or worse depending on what kind of debt it is. Here's the low-down.

Your financial debt can have a significant impact on your children’s social and emotional well-being and behavior. But the effect can be positive or negative — it all depends on what type of debt you’ve accrued.

Those were the findings of a new study published in the journal Pediatrics by researchers at the University of Wisconsin at Madison and Dartmouth College.

While other studies have focused on debt and its impact on adult well-being and mental health, this study is unique in its focus on parental debt and its impact on a child’s socioemotional well-being.

Researchers found that while parents’ unsecured debts — such as credit cards, medical bills and payday loans — may adversely impact children’s socioemotional well-being and behavior, other types of debt — including student debt and a home mortgage — may have a positive impact on children’s well-being.

“Debt that allows for investment in homes (and perhaps access to better neighborhoods and schools) and parental education is associated with greater socioemotional well-being for children, whereas unsecured debt is negatively associated with socioemotional development, which may reflect limited financial resources to invest in children and/or parental financial stress,” the study concluded.

The study is based on observational data from 9,000 children ages 5 to 14 and their mothers collected from 1986 to 2008.

“To measure the socioemotional well-being of children, the study looked at a child’s total score on the Behaviorial Problems Index (BPI), a set of 28 questions to mothers that looks at the frequency and severity of child behavior,” according to a press release.

“Overall, our findings support the narrative that debt is a ‘double-edged sword,'” said Jason Houle, study co-lead and assistant professor of sociology at Dartmouth. “Debt can bridge the gap between your family’s immediate economic resources and the costs of goods and therefore can be a valuable resource but at the end of the day, it has to be repaid with interest and sometimes with a great deal of interest when it comes to unsecured debt,” Houle explained.

Check out “Financial Stress May Be Costing You Your Health.”

What do you think of the results of the study? Share your comments below or on our Facebook page.

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