Parents try to insulate kids from many of the harder things in life—to give their children space to be children, insulated from the stresses of adulthood. Of all the stressors in life, financial stress is one of the most common, and it's one that compounds itself: It is far from cheap to raise a child.
But how does this vicious cycle affect the kids?
A new study by researchers at Dartmouth and the University of Wisconsin at Madison examined data from just over 9,000 kids and their parents that tracked their well-being from 1986 to 2008 to see how debt affects kids.
The main results weren't particularly surprising. Kids are generally affected for the worse when their parents have greater total debt. It stands to reason: Debt equals stress, and stressed parents may not be able to operate at their full potential.
But the findings weren't quite as simple as Debt=Bad. The nature of the debt makes a huge difference. When the debt was taken on to finance a house, or invest in a parent's education, the debt actually resulted in a net positive for the children. Taking on debt in order to get better jobs for parents and better neighborhoods, homes, and schools for kids is an investment that's well worth making. According to the researchers, "debt may mediate or moderate associations between socioeconomic status and child well-being." In conclusion, researchers said, "debt is not universally harmful for children’s well-being, particularly if used to invest in a home or education."
The problem is unsecured debt, which the researchers write "is negatively associated with socio-emotional development, which may reflect limited financial resources to invest in children and/or parental financial stress." We're talking here about things like credit card and medical debt, which are to be avoided if at all possible.
One suggestion made by the researchers is that pediatricians ask questions if there's reason to believe parents are stressed out by debt--because this can affect how they parent, and therefore affect children. "Pediatricians should be concerned about the socioemotional development of children whose parents have unsecured debt," the study states. "It may be efficacious to discuss with parents whether they are experiencing financial-related stressors, such as unsecured debt, and whether and how such stressors may be influencing their parenting and interactions with children."
A brief pediatric visit may not be the ideal forum for discussing parents' financial status, so the researchers put forth a suggestion: getting the health care providers to flag patients with overdue medical bills and add debt questions to patient surveys.