How do your parents feel about debt? The answer may have a lot to do with your own feelings about your current financial situation.
Parents pass on their anxiety levels around debt to their children, according to a study distributed Monday by the National Bureau of Economic Research, in Cambridge, Mass.
Some 56% of those surveyed said they feel uncomfortable with debt and 62% said their parents feel uncomfortable with debt. The researchers, from Stockholm University and The George Washington University, concluded that children closely follow their parents’ leads when it comes to their feelings about debt. However, they noted that the younger generation feels more comfortable with debt than their parents, “showing that attitude toward debt is changing across generations.”
Mothers and daughters were more uncomfortable with debt than sons and fathers. Women were also slightly less likely to discuss money with colleagues.“Thus, family and intergenerational transmission of attitudes toward debt can be quite influential for women,” the study concluded. (The researchers asked about 400 men and 450 women in Sweden about their feelings toward debt, in the fall of 2014. They were all between the ages of 25 and 75.)
The theory that our comfort with debt is passed down from generation to generation is particularly relevant in the U.S. in 2018. Debt in the U.S. has skyrocketed in recent years. Collectively, Americans have more than $1 trillion in credit-card debt, according to the Federal Reserve. They have another $1.5 trillion in student loans, up from $1.1 trillion in 2013. Motor vehicle loans are now topping $1.1 trillion, up from $878.5 billion in 2013. And they have another nearly $15 trillion in mortgage debt outstanding.
Debt in Sweden has also grown. The aggregate debt-to-income ratio, a common measure of a household’s debt burden, rose from about 80% of disposable income in 1970 to about 180% of disposable income in the country in 2016, the researchers said. That’s higher than most other European countries.
One reason: Over time, the government has increased lending for homes, and has financed more student loans as well. That means it has become easier for Swedes to get these loans, putting themselves into debt.
Of course, there can be some upside to temporary debt, the researchers wrote. Problems arise when people “underestimate the future debt burden associated with a loan,” they said. But if people are so afraid of debt that they don’t invest in themselves — such as through paying for education, or a move that helps with one’s career — that can be economically inefficient for the country overall.
The findings may help consumers understand what drives economic inequality and, given that parents pass their feelings about debt to their children, also help to prevent it.
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