Researchers from the University of Wisconsin at Madison and Dartmouth have published a new paper in the journal Pediatrics, detailing the link between parents’ debts and the socio-emotional wellbeing of children within the family.
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Before this time, there had been studies that examined the effects of debts on the mental health of adults, but this is the first study exploring the association between parents’ debts and the emotional wellbeing of their children.
The researchers revealed that when parents incur high mortgage and student loans, it affects the socio-emotional wellbeing of others within the family, most especially the children within the home; and if the debts are unsecured, that is, not tied to a personal asset, it affects the behaviors of the children more.
The reason for this, according to the researchers, is that large unsecured loans produce stress and anxiety which parents unwittingly pass on to their children, and sometimes the load of burden hinders the parents from displaying proper parenting, hence creating a stress level in the children.
Lawrence M. 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 led the study, together with Jason N. Houle, an assistant professor of sociology at Dartmouth.
“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,” Houle explained.
The researchers based their study on data from the National Longitudinal Study of Youth 1979 where over 9,000 children aged 5 to 14 were analyzed, together with their mothers every year or every two years between 1986 to 2008.
To fully capture the socio-emotional wellness of the kids , they were asked to answer a set of questions on which they were rated on the Behavioral Problems Index (BPI), while mothers were asked a set of 28 questions that examined how and when kids acted up as from age 4 above in response to internal pressures within the family.
The Federal Reserve Bank of New York's Household Debt and Credit Report, as of September 30, 2015, for the third quarter of 2015, calculates total household debt to be $12.07 trillion. This family debt value made it clear that several parents are taking on unsecured debts without measuring the impacts on their family – something they need to be educated on.
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“For those who are taking on a lot of credit card debt, or are buried in medical debt, or have payday loans – for many, it's the only choice they have,” Houle explained. “In an era where wages have stagnated and costs have risen but credit has become more readily available (due in large part to financial deregulatory policies at the state and federal level over the past three decades), families are going into debt to help make ends meet and keep their head above water.”