Your Debt is Hurting Your Children In More Ways Than You Think


If your high debt has been impacting your credit score for many years, you may think you are the only one affected by it. Maybe you’ve even learned to accept the consequences of the many areas of your life that may be impacted by high debt or a low credit score.

But what if you aren’t the only one affected by your debt? If you have children, this is very much the case. There are many ways in which your financial management behaviors, your debt level, and your credit rating trickle down to your kids.

Your financial behavior will shape theirs

As a parent you know all too well that your children learn about all aspects of life and how to handle various situations from you. It stands to reason then that this is also the case when it comes to finances and debt. The lessons your children learn about money and maintaining credit while they’re growing up will shape the way they handle their own finances later in life.

If your children grow up witnessing you living beyond your means or overextending yourself when it comes to credit, this will very likely lead them to repeat those bad habits in adulthood. You can set a better example by saving and budgeting to pay for things along the way.

Research published by the Journal of Consumer Affairs confirms this. This research found that parents’ financial behavior affects their children both directly and indirectly “through general self-control skill development. Furthermore, the influence of parent is moderated by parent-child relationship. These findings highlight the importance of parental financial socialization.”

And a first-of-its-kind study from Dartmouth College found that parents’ credit also has socioemotional implications. The research found that while children may benefit from an environment in which their parents own a home and/or have higher levels of education and therefore some student loan debt, children with parents that have higher levels of unsecured debt (credit cards, medical debt, or payday loans) were likely to experience poorer socioemotional well-being.

“High levels of unsecured debt may create stress or anxiety for parents, which may hinder their ability to exhibit good parenting behaviors, and subsequently affect the wellbeing of their child or children,” the study said.

Poor credit can also impact your children by preventing you from obtaining credit for things your children need. This includes everything from that back-to-school shopping trip, to financing major purchases such as braces, which can cost several thousands of dollars.

And as your children get older, your credit score may even impact their ability to establish their own credit. Applying for student loans, first car loans, or any type of loan where a co-signer may be necessary will be difficult or impossible if your credit score is too low.

If you’re beginning to repair your credit, putting an end to impulse purchases and buying things on credit is essential. And it will send a much better message to your children, too. There are several other things you can teach them too that will make a difference in the long run when it comes to managing their own credit and debt.

Here are four important credit topics to discuss with your children:

  1. Expose them to finances and credit. It’s important to make sure your child understands the concepts of earning money, borrowing money, and paying it back. You can begin these lessons early. As your child gets older it is a good idea to provide them with a credit card for emergencies and then review credit card statements with them so that they understand how interest works and how important it is to pay off card balances.
  2. Talk to them about how credit will affect their lives. It’s important for children to understand the implications of credit and how it will play a role in everything from getting a job or renting an apartment, to buying a car and, eventually, their own home. Talk to them about good credit habits.
  3. Explain to them the importance of monitoring their credit score and teach them how to do it. Talk to your children about what information is contained in a credit report and how that will impact their credit scores. Make sure they are aware of the resources available to them to obtain a free annual credit report and allow them to review yours when you receive it. It’s also important that your children understand that it’s easier to maintain good credit from the get-go than it is to spend time fixing their credit.
  4. Talk to them about protecting themselves from identity theft. To protect our children’s safety, we teach them early on what type of information should and should not be shared. As they get older, it’s also important to talk to them about ways identity thieves can trick them into sharing sensitive personal information that can be used by criminals. Identity theft ranks among the fastest-growing crimes and it is something that should definitely be discussed with your children as part of their financial and credit education.

It’s never too late to begin managing your debt and repairing your credit. In fact, if you are working to repair your own credit, your children can learn valuable lessons as you go through the process. Not only can they learn the consequences of acquiring too much debt, but there are important lessons that can be learned about taking the responsibility and initiative to repair the financial mistakes of the past and use credit more responsibly going forward.

If you’re not sure where to start when it comes to repairing your credit and improving your credit score, can help. Contact us for personalized credit repair services today.

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