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How Parents’ Debt Affects Children

By Amanda Reaume on November 15, 2016 No Comments
Children smiling at a beach

While they might not always show it, children are incredibly sensitive to everything going on in their parents’ lives. It’s therefore not surprising that the stress that family experiences from dealing with debt could have an impact on kids.

A recent study by Lawrence M. Berger of the Institute of Research on Poverty at Dartmouth found that certain kinds of parental debt can affect kids’ socio-emotional well-being.

The study found that parents who had more unsecured debt like credit card debt, payday loans, or medical loans were more likely to have children that acted out and displayed negative behaviours. This is likely because higher levels of this kind of debt can cause significant amounts of stress and anxiety – something that children pick up on. It might also leave parents with less time or ability to parent their children properly and that can lead to children misbehaving as well.

Surprisingly, parents with higher levels of student loan debt or mortgage debt had children with fewer socio-emotional problems and those kids were less likely to act out. The researchers believe that it might be because such parents are better educated and potentially of higher socio-economic status which means that they can create a better environment for their children to thrive and learn healthy behaviours. Despite this, it was found overall that those who had the greatest amount of debt – regardless of the type – were more likely to have children who acted out.

So, does this mean that if you have debt your children are destined to have behavioural issues? Not exactly. The study didn’t find a direct cause-and-effect relationship between debt and behaviour issues. The researchers believe that the big difference between the households was in how parents reacted to debt and how they parented their children.

Canadian Families Drowning in Debt

Canadian parents are drowning in record amounts of debt. According to Statistics Canada, Canadians have $1.97 trillion in consumer debt – $585.8 million of which is consumer debt and $1.29 trillion of which is mortgage debt. That’s $21,580 in non-mortgage debt each and around $1.68 in debt for every dollar in disposable income that Canadians earn annually.

Given the results of the study, you might be wondering how it’s affecting your children and what you can do about it.

What You Can Do

If you are in debt and you’re worried about how that debt may be affecting your children, there are steps you can take.

1. Go see a financial advisor:

A professional will be able to help you come up with a plan for getting out of debt. This won’t just help you get out of debt faster, but it will likely also help reduce the stress that you feel about your debt. This will create a happier atmosphere at home and allow you more time to spend with your children creating an environment that is conducive to their healthy growth.

2. Go see a counsellor:

If you’re overwhelmed by your stress and anxiety, it makes sense to see a counsellor to speak about your feelings. By speaking about the source of your stress, you can come up with solutions for how to tackle it. You can also talk to a counsellor about your children’s behavioural problems. They will likely be able to offer you suggestions for how to deal with them. If you’re worried about being able to afford to counsel, ask your doctor about free or low-cost options in your community.

3. Protect your children:

If your children are acting out and you think it might be related to your stress about your debt, make a conscious effort to protect your children from discussions about money. Children don’t understand something like debt, but they do understand when they see their parents stressed out or anxious. Try to avoid discussing money matters around your children if you can’t do it without your anxieties bubbling up.

4. Talk to your kids:

If you think your children are concerned about your debt, talk to them about your financial problems and reassure them that everything will be okay. This will help them feel more secure and comforted and could go a long way to helping to fix their behavioural issues.

If you’re in debt, this study is a great reminder that your children are listening and watching and that your actions have an impact on them. No one wants their children to suffer because of stress about debt or money. By protecting your children and taking action to reduce your stress around your debt, the whole family will feel better.

Image Credit: korycheer

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Amanda Reaume


Amanda is a freelance writer and the creator of the blog Millennial Personal Finance. After graduating from university with no debt, and $40,000 in savings, Amanda wrote the book The Complete Guide to a Debt-Free Education. She is also the author of a personal finance book aimed at Millennials called Money Is Everything.

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