New research has suggested that children of parents with "unsecured debt," like credit card debt or unpaid medical bills, were more likely to develop behavioral problems than kids whose parents did not have debt. Study co-authors Jason Houle, assistant professor of sociology at Dartmouth, and Lawrence Berger, director of the Institute for Research on Poverty and professor and doctoral program chair in the School of Social Work at the University of Wisconsin-Madison, analyzed data from two U.S. studies, which together tracked more than 9,000 mothers and their children ages 5 to 14 between 1986 and 2008.
"The problem of debt being linked to behavior issues is likely to be a broad societal issue."
"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," said Houle. "That is indeed what we find. Overall, our findings support the narrative that debt is a 'double-edged sword,' as my colleague at Ohio State University, Rachel Dwyer, puts it."
The study showed that parents coping with debt reported their children with emotional and behavioral difficulties are significant levels higher than their peers without the debt. While children of parents with both secured and unsecured debt reported issues, it was unsecured debt that was of particular statistical significance. Children of parents with mortgages and/or educational debt seemingly faced a diminished risk for childhood behavioral problems compared to the unsecured debt group.
"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," added Houle.
The authors were quick to note that the study, while significant and sound in its methodology, did not fully address "the 'correlation is not causation' problem," but did "make for a more compelling case and suggests that if a family takes on a great deal of unsecured debt, their children may feel the consequences of that debt."
"It makes sense that the type of debt you have makes a difference," said Nadine Kaslow, former president of the American Psychological Association. "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."
The problem of debt being linked to behavior issues, as proposed by Houle, is likely to be a broad societal issue, rather than the function of individual parental irresponsibility. Still, it has raised awareness of the wider impact of consumer credit usage.