Parents' Debts Have Some Adverse Effects On Children, Study Finds

A recent study suggested that unsecured debts like overdue medical bills and unsettled credit card balances have some adverse effects on children's socioemotional well-being. While other types of debts which can be deemed as beneficial, such as educational loan and home mortgage, have a positive impact to a child's emotional well-being.

According to the researchers at the University of Wisconsin at Madison and Dartmouth, parents' debt can greatly affect children's behavior. Thus, it will depend on what type of debt was it as each liabilities can contribute positive or negative outcomes among children.

Researchers looked at the data of more than 9,000 mothers and their children -- with ages 5 to 14 from the year of 1986 to 2008. After comparing the families' debt information, experts found out that those parents held more debts were more likely have children with behavior issues compared to those who had less debt or no debt at all.

As the researchers dig deeper, they discovered that the biggest driver behind kid's bad behavior was unsecured debts such as unsettled credit card bills. They also found out that those parents who only have "beneficial debts" like education debts and home mortgage had fewer behavioral problems.

"It makes sense that taking on debt for specific investments can be beneficial. For example, taking on student loans to go to college or a mortgage to buy a home may lead to better social and economic outcomes. Hence, taking on unsecured debt, such as credit card debt or payday loans, that are not tied to such investments may not," lead author Lawrence M. Berger of the Institute for Research on Poverty at the University of Wisconsin-Madison explained to Yahoo!

The findings which were published in the journal Pediatrics, however, cleared that the research doesn't prove that there's a "direct cause-and-effect between children's behavior and parents' debt."