Is your debt hurting your kids?

By Marianne Curphey


You have likely stressed over debt, bills and money. You may have wondered how you will make it to your next paycheque, or perhaps fretted over what would happen if the base rate were to rise.

You may not have considered, though, how your mounting debt and pinched finances are affecting your children.

According to the Bank of England, consumer credit in 2016 rose at its fastest rate in 11 years, reaching £192bn in November, a 10.8% increase over November 2015. According to a summer 2016 Aviva Family Finances report, on average, families had £2,190 in credit card debt, up 12% on summer 2015 when the figure was £1,960.

With debt rising at such a quick rate, it isn't hard to picture many adults worried about their finances. However, it is not only adults or breadwinners who are suffering as a result of financial strain. It can hurt your little ones and teens, too.

How debt affects children
According to The Children's Society, there could be as many as 2.4 million children in England and Wales living in households that are struggling with problem debt. This puts these kids at greater risk of having poor mental health than children of debt-free parents.

Almost a quarter (23%) of children in debt-ridden families, equivalent to more than 500,000 children, are unhappy with their lives, the Children's Society says. This means that children living in families struggling with problem debt are five times more likely to be unhappy than those in families without debt troubles.

For some children, debt means not being able to socialise or take part in activities such as sports or school trips, and missing out on birthdays, family gatherings and holidays, the report states. Children may also feel embarrassed for not owning things that are considered "normal" by their classmates.

"It's an issue because they can be bullied if they don't have the same things as their friends and they have to go without," says Laura Rodrigues, senior public policy advocate at debt charity StepChange.

The Children's Society report says children may feel guilty for not being able to help their parents with debt. A StepChange report on family debt confirms this. It found that more than half of children (58 per cent) in families with problem debt said they worried about their family's financial situation.

"Half of children in families with problem debt say it causes arguments in the family," Rodrigues says. "People get stressed and anxious about financial worries and have sleepless nights. Children's own mental health is definitely an issue in a family situation where there is a problem with debt."

Asking for help can reduce stress all around
Families with dependent children experience extra pressures as they are more likely to face unexpected bills and are less able to cope with sudden financial shocks, caused by things such as redundancy, reduced working hours or illness.

Matt Hartley, head of public affairs at the Money Advice Trust, says just taking the first step of seeking advice could reduce a lot of the stress and worry around money. He adds it's better to get help sooner rather than later, as it is easy for debts to snowball.  

"Our research found that five million Britons are worrying about money," says Hartley. "This is a clear warning sign that they need to talk and seek free, independent debt advice."

He says debt counsellors can help people struggling to make ends meet, people who sometimes put essentials, such as supermarket shopping, on credit cards.

"If you don't take action, then interest and charges can accumulate," he says.

Talk about finances with your children
You should also make money a family matter, Rodrigues says. Managing credit and repaying debt requires prioritising your family spending and to reducing outgoings to free up money.

"Deciding whether or not to explain to children that you are going to budget more carefully in the future is a decision for individual households," Rodrigues says. However, as a general rule, discussing money matters with older children might help them appreciate the issues involved. 

See related: How to manage debt on an unpredictable income, Money and credit tips for your 30s and 40s

Published: 1 February 2017