Editorial Policy

Parents' Financial Fights May Lead Kids Into Credit Card Debt

Marcia Frellick

November 19, 2012

If you think back to your childhood, do you remember your parents fighting about money? If so, that may have had an effect on the way you managed credit in college, according to new research.

Researchers at East Carolina University in Greenville, N.C., studied the link between parents’ roles and the financial knowledge and behaviors of college students at seven universities across the U.S.

You might expect that students who witnessed parents’ financial arguments would be more conservative in their credit use in an attempt to avoid their parents’ mistakes. But the study’s results, released in the October issue of the Journal of Family and Economic Issues, showed the opposite. They were the most likely among students polled to have larger credit card balances. They were also twice as likely to have more than two cards compared with those whose parents didn’t argue over money matters.

In fact, the study’s authors concluded parents arguing about money was one of the top predictors of a student having credit card debt over $500. The study notes that credit card debt over $1,000 is risky for this age group and has been linked in previous studies to unhealthy behaviors like substance abuse.

The Credit CARD Act of 2009 stopped issuers from actively recruiting on college campuses and tried to curtail consumers under 21 from getting their own credit card accounts unless they could show proof of income. However, the study found nearly two-thirds of the more than 400 students surveyed had a credit card, and nearly a third had more than one.

The study’s authors point out that some behaviors may start to develop from what they hear at home. With that in mind, here are some tips for family money discussions:

  • If the talk is getting heated, move the discussion out of the house away from the children or schedule a time to talk about it when the kids are away.
  • Deliver a consistent message if you need to share bad financial news with children. Talk with your spouse about what you will say so that you don’t add confusion to the mix.
  • Encourage kids to ask questions and use financial missteps as a teaching tool.
  • Be honest, but don’t worry children with too many details.

“It is clear that the influence of parents cannot be underplayed,” the authors concluded. “Researchers, educators and policymakers should work with, and include, parents in finding effective ways to increase the positive financial behaviors of college students, particularly those behaviors related to credit card use.”