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Julia Barnes for Fatherly

Why So Many American Families Are in Debt

Most parents dramatically underestimate the amount of money they’re going to spend when they have kids. Should we punish them for it?

In D.H. Lawrence’s short story “The Rocking Horse Winner,” a little boy is so stressed out by his parents’ debt and obsession with money that he makes himself sick predicting winners to bet on in horse races. The boy wins more and more money for his parents, but it’s never enough. Then, he dies.

The field of psychology was in its infancy in 1926, when Lawrence’s story was published, but his premise that money issues in a family have an emotional impact on the children was, and continues to be, very true. So, too, does the notion of a household that continually hisses, “There must be more money!” Nearly 80 percent of Americans surveyed — even some who earn $100,000 a year or more — said they live paycheck to paycheck, according to 2017 research from CareerBuilder. In fact, one in four respondents said they don’t put anything away in savings each month, three in four said they currently were in debt, and more than half said they expect they will carry debt for the rest of their lives.

Debt is even harder for parents to avoid. Raising kids is expensive, particularly so today with such factors as stagnant wages, sky-high rents and student loan debts, and the costs associated with intensive parenting. Those with four or more kids tend to have the highest debt, with an average balance of $141,086, according to a recent survey conducted by Experian. That’s 51 percent more than the national average and $34,881 more than those with only one child.

The blame for rising debt often is laid at the feet of consumers for “living beyond their means,” although some argue that overconsumption is more a conservative myth than evidence of a moral failing. In 2013, economist and author Robert B. Reich wrote that stagnant wages and rising income inequality were more to blame than irresponsibility for the increase in consumer debt. In an article published in 2004, when she was a professor at Harvard University, Elizabeth Warren noted that family income had risen substantially since the 1970s, but the amount families were able to save had plummeted due to inflation.

So, yes, it’s more expensive to be a parent than ever. It’s also easy to imagine how even frugal parents might find themselves teetering on the edge of debt, which could be one medical emergency or pricey summer enrichment camp tuition away.

“Most parents dramatically underestimate the amount of money they’re going to spend when they have kids,” says psychologist, financial adviser and parent Brad Klontz.

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Many of Klontz’s clients, in fact, never overspent before they had kids but started accruing debt as parents. A common scenario he sees among his parent clients is rationalizing spending on better child care and schools than they can afford. “It’s like your biology kicks in,” he says. “Parents will do and spend almost anything for the benefit of their kids. We’re wired to do that.”

It’s unsurprising, then, that money troubles top the American Psychological Association’s annual poll of top stressors among adults year after year, and financial hardships have many obvious downsides for families. Stressed parents preoccupied with bills have fewer resources to tap into to parent. They might be less present and relaxed around their kids. They might have multiple jobs that keep them away from home, and when they are home, they might be tired and irritable. Parents who lose a job might need to move their families to smaller homes, requiring kids to change schools or get used to a neighborhood that might be less safe, and more stressful.

Debt doesn’t necessarily mean parents will engage in unhealthy money behaviors that could have damaging effects on kids, however. But of course it doesn’t help. Klontz describes a client who told him that when he was 8 years old, his mother announced that they were losing their house, then locked herself in the bathroom and cried.

“That’s a really intense experience when you’re 8,” Klontz says. As a result, his client “had developed a deep insecurity about money as an adult and had organized his entire life around not letting that happen to him.”

Developing a Scrooge-ian attitude toward one’s finances is one of the learned “disordered money behaviors” that Klontz has seen in his work.

“A big focus of my research is on ‘money scripts,’ or our subconscious beliefs about money that we inherited from our parents and grandparents,” Klontz says. “They predict income, net worth, debt, and a whole host of money behaviors learned from what our parents said and didn’t say about money.”

Rigid, inflexible parents don’t prepare their children to effectively deal with stress, Klontz and his co-authors have found. Parents whose boundaries are too flexible, on the other hand, might negatively affect their children’s ability to develop appropriate coping skills. Both extremes affect how kids handle money when they grow up.

Other researchers have come to similar conclusions. A study published in the Journal of Family and Economic Issues in 2013 found that college students whose parents fought about money were more likely to pay only the minimum balance on their credit cards and to carry more than $500 on the card.

Researchers at Dartmouth University noted that the type of debt parents have is more significant than the amount. In their paper published in the journal Pediatrics in 2016, they wrote that high mortgage and student loan debt didn’t have the same negative impact on parents’ and kids’ well-being as credit card or medical bill debt, says lead author Lawrence M. Berger, director of the Institute for Research on Poverty and professor and doctoral program chair in the School of Social Work at the University of Wisconsin-Madison. Kids whose parents had more mortgage and student loan debt, in fact, tended to fare better than kids whose parents had less mortgage and education debt.

“Housing and educational expenses are investments and might not be as stressful to pay back, especially with reasonable interest rates,” Berger says. “The key question is, will you be able to pay it back without too much stress or hardship? If the answer is yes, then it’s much less likely to have an adverse effect on kids.”

The effects they found weren’t huge but they were significant, Berger says. The negative effects of unsecured debt on kids fell into two sets of behaviors, Berger says: internalizing, including anxiety, depression, and withdrawal; and externalizing behaviors, such as aggression.

Berger notes, however, that debt might not be the cause of bad money behaviors but rather a symptom of psychological issues. He and his team are careful to isolate the effects of debt by looking at changes that occur rather than just looking at who goes into debt and who doesn’t, he says.

“There could be psychosocial problems in people that result in increasing debt,” he says. “Maybe people who are more impulsive are more likely to go into debt and also might be less positive parents.”

An example of less positive parenting is a disordered money behavior Klontz coined a term for: “financial enmeshment” (also known as “financial incest”), when parents inappropriately share stress about money with their kids. Examples are telling kids they can’t go on a field trip because Dad hasn’t paid his child support or that Mom gambled away the family vacation money for the year. It’s the sharing of information kids aren’t equipped to deal with yet.

“Parents who are stressed and don’t have an adequate support system might be tempted to use their kids as therapists,” Klontz says. “If you feel any sense of emotional relief after talking to your kids, that’s a red flag that it might be inappropriate.”

Men are more likely than women to engage in financial enmeshment for various reasons, Klontz notes. Studies still tend to show that men have lower levels of emotional intelligence than women, so they could be less likely to grasp that money talk with children might be inappropriate, he says. Or they might be less aware that their money stress is leaking in the family’s collective consciousness. High-income men, interestingly, are most likely to inappropriately blab about finances to their children than men who make less.

“Our culture teaches men that they’re valuable according to the amount of money they make and how successful they are in their jobs,” says Sabrina Bowen, a licensed marriage and family therapist in Rockville, Maryland. “So some fathers might think, ‘I’m successful at work, so I’ll use the same skills that make me successful at work with my kids or my spouse.’ This makes logical sense but unfortunately isn’t true. Success at work and with loved ones requires different skills.”

Financial denial is another disordered behavior Klontz has seen in his research. Financial deniers avoid thinking about money and stick their heads in the sand about it, which isn’t any healthier for kids, he says.

“What’s the message to the child? How do they make sense of that? They learn that money isn’t important or that it’s too scary to talk about, both of which are damaging,” he says.

What’s healthiest for kids is a happy medium when it comes to money. Parents should talk about the value of money and the family’s priorities with their kids, says Derek Hagen, certified financial adviser and financial behavior expert. Parents also need an outlet to talk about money issues freely, for their own mental health.

“I often recommend couples go on ‘money dates’ where they can discuss money matters in a safe environment, with no shame and no blame, away from the kids,” he says.

Money dates are a great way to help make sure kids aren’t inadvertently picking up on your money stress when you think they’re not paying attention, Klontz adds. He learned that lesson when his son was six and announced he wished he had $1 million. Playing along, Klontz asked him what he’d do with his money and was surprised when his son said he would hire movers to move all their stuff. He then realized that his son must have overheard he and his wife discussing moving costs and had worried about it.

“That was a huge wake-up call for me,” Klontz says.

Kids are little sponges who absorb your stress. They notice when, say, you lose your job and stop leaving the house for work, he says. So, it’s crucial, then to find age-appropriate ways to involve them in what’s going on.

“It’s important that what you say comes from a place of strength, like, ‘We’re your parents and we got this. This isn’t your problem to deal with,’ ” Klontz says.

They might be upset that the family has to move to a smaller home if things are really tight, but reassure them that you’ll make it work. You can also involve them in the solution, such as by telling them you’re not going to eat out as often for a while, so to pick their three favorite meals that they’d like to cook with you that week.

“That’s what kids want more than anything anyway — more time with their parents,” Klontz says.