Arguing Over Money Drives Your Kids to Credit Card Debt

By Emily Guy Birken. Last updated 8 July 2014. 4 comments

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Just in case you didn’t have enough to worry about, researchers from East Carolina University have recently discovered yet another way we can screw up our kids. Apparently, children of parents who argue about money are more likely to be burdened by credit card debt as college students.

This cheery information comes on top of concerns about the financial literacy of young people. According to a 2009 study by Annamaria Lusardi, Olivia S. Mitchell, and Vilsa Curto, “fewer than one-third of young adults possess basic knowledge of interest rates, inflation, and risk diversification.” That level of financial illiteracy is hardly a good foundation for handling credit card debt, and yet that is exactly what is happening with college students. And according to the Journal of Family and Economic Issues, there is also “growing concern among educators that more students are dropping out of school, not because of academic failure, but because of financial reasons, and credit card debt especially.” All of this together makes it clear that we as a society need to do a better job of preparing our children for financial independence.

But what, exactly, are we doing wrong? And how can we better prepare our kids for the temptations of credit? Here is a basic breakdown of the East Carolina University study, and some tips for increasing your child’s financial literacy before they find themselves quitting college to pay off their credit cards. (See also: 7 Important Lessons Frugal Parents Teach Their Children)

The Study

Researchers, led by Adam Hancock, developed the College Student Financial Literacy Survey, and asked 413 undergraduate students from seven different American colleges to take part. Among the topics on the survey:

  • The number of credit cards the students owned and the amount they owed on each one.
  • What kind of interactions the students had had with their parents when discussing finances.
  • Financial knowledge of credit cards, loans, insurance, and personal finance.
  • Attitudes toward credit — whether the students regarded credit cards as costly, safe, frightening, etc.
  • The students’ comfort level with only paying the minimum each month.

The Findings

Of the 413 students surveyed, almost two-thirds owned a credit card, and nearly one-third had more than one credit card. The researchers found that there were three top predictors for how many credit cards a particular student had: class year, gender, and whether or not parents argued about money. In particular, juniors and seniors were almost four times as likely to have two or more credit cards than freshmen and sophomores. This finding makes sense, considering the fact that the 2009 Credit CARD Act was partially enacted to help prevent minors from taking on credit they couldn’t afford. Upperclassmen are more likely to be over 21, meaning they don’t need a cosigner to take on a credit card. In addition, women were twice as likely as men to have multiple cards — although the researchers were a little more vague on the probable reason behind this one. Finally, students whose parents argued about finances were twice as likely to have two or more credit cards as those whose parents presented a united financial front.

These conclusions would not necessarily be troubling if the students carrying these multiple cards were able to handle their debt responsibly. However, students with more than one card were three times as likely to be carrying at least $500 in credit card debt. The bad news for parents keeps coming, because coming from a home with a lot of fights over money also doubles the likelihood of carrying more than $500 in debt.

Arguing over money was problematic for kids from every walk of life, as well. It might seem like a reasonable assumption that money fights would be more common among lower-income families, which might also correlate with higher debt in the next generation. But the study actually controlled for wealth, and found that even kids from wealthy backgrounds were more likely to take on credit card debt if their parents argued about money.

OK, Money Fights Are Bad — but Why?

While the researchers don’t have a specific conclusion as to why arguing over money can have such long-lasting consequences on the kids, the study’s authors suspect that money fights are an indicator for unhealthy financial attitudes and actions. Study co-author Adam Hancock suggests that “kids growing up in that sort of atmosphere may be witnessing some unhealthy financial decisions. And they tend to act out those same behaviors.”

Another possibility for why money fights could have such lasting consequences is because they make the entire issue of finance fraught with negative emotions for everyone in the household. Kids will feel like money is something you can’t talk about without starting a fight — so they don’t talk to their parents about money. When they get out on their own, they may choose to handle financial issues without asking their parents for advice and seriously get themselves in trouble.

Neither of these possible explanations completely explain why parents fighting about money could result in kids with credit card debt — and that’s because there is only a correlation between the two factors. That means that we can say that two things seem to be related to each other, but we can’t know for sure that one causes the other. (Remember your college statistics class? The one you slept through?)

Basically, without a much larger study that includes many more participants and that looks into many more specifics of the fights between parents as well as other background information on the families, it’s a little fast to assume that all parents who have arguments over money will be looking forward to Junior racking up credit card debt the moment he gets out on his own.

Financial Literacy at Home

That being said, teaching financial literacy to our children is an important part of preparing them for adulthood. Whether or not you and your spouse have occasional spats over the mortgage, the Visa bill, or how you’re going to pay for the college Junior might drop out of, you can always use these strategies for keeping your kids money literate:

1. Include Your Child in Money Discussions

We tend to shield our children from financial conversations. After all, budgeting, bill paying, and saving can all feel like a bit of a bummer. And while there is no reason to bring your child into your financial worries — no 9-year-old needs to know that you’re concerned about how you’re going to pay the mortgage — that does not mean they’re unable to handle money discussions in general.

Start when they are small, and talk to them about why you choose one loaf of bread over another in the grocery. Help them understand that you try to save money by comparing prices, and ask for their help in figuring out what is cheaper. As they grow, include them in more of your decisions. For example, you could ask them to help you to figure out where the family can go on vacation based on the budget you have set aside.

When money is shrouded in mystery for children, they won’t suddenly wake up at age 18 knowing how to handle their finances. Introduce the concepts to them slowly, in the same way you teach your children to read — with age-appropriate lessons.

2. Give Your Kid an Allowance

While one of the biggest flame wars you can see on parenting websites is on whether or not to give allowances as payment for chores, financial and parenting gurus can all agree that the allowance itself is key. Having the responsibility for money each week — and making sure that you don’t simply buy the kid anything he wants when the allowance has run out — is one of the best ways to teach budgeting skills and delayed gratification. After all, we all learn by doing, and it’s better for Junior or Sis to learn early that cash doesn’t last forever and that some things are a waste of money.

3. Encourage Your Teen to Get a Job

Many parents feel that their child’s job is to do well in school, and have no other expectations of paid employment for them. Even if that is how it works in your house during the school year, it’s a good idea for your teen to have a job over the summer. Learning how to be a good employee, how to be responsible with a paycheck, and having some part in saving up for college or another big goal are all important lessons that come from teen employment. If they also work during the school year, then they will have a trial run at figuring out work-life balance before they find themselves on their own, which is another important financial lesson.

The Bottom Line

Even if you and your partner fight about money — and really, who doesn’t? — all is not lost. Yes, money fights may be correlated with irresponsible credit card behavior, but you have the ultimate influence over your child. As long as you are proactive in using that influence instead of just letting your child soak up negative atmosphere, then you can rest assured that they are learning good habits from you. And by talking to them about money, you give them an opportunity to have an open dialogue with you later on if they hit a bump in the road.

Now, for the million and one other ways you can mess up your kids…

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Guest's picture

Interesting article! One of my friends is carrying quite a bit of debt (credit cards & student loans). She said that her parents argue over money, and it has shaped the way she views her own finances.

She didn't have a lot growing when she got older, she bought everything she wanted without giving a second thought to whether or not she could afford it. The problem now is that she's deep in debt.

People don't realize how much they'll pay over time when they go into debt. There's nothing more important than safeguarding your financial well-being. There's a really nifty calculator by that shows you how much your debt is really costing you. ( It can be a real eye-opener.

Guest's picture

I think that people who have parents that fight over money are more likely to have credit card debt because they think it better, easier and less tension, when you pay by credit than to argue or think about whether you can afford things. Arguments go away, even if just temporarily if just pay by credit and dont ask questions.

Guest's picture

“kids growing up in that sort of atmosphere may be witnessing some unhealthy financial decisions. And they tend to act out those same behaviors.”

I absolutely agree that that is the probable reason that kids whose parents fight about money have more debt. It's not the fighting, it's the bad money habits that start the fights in the first place.

When you make sure to develop good habits with money such as budgeting and getting out of debt, it can eliminate money fights from your marriage for good. My wife and I have been out of debt for about 6 years now (except for the house) and we just don't argue about money at all. When kids see you handling money responsibly, they are more likely to follow suit as well.

I recently wrote an article on the subject that might be of interest:

"Teach Your Kids to Manage Money (6 Tips)"

Guest's picture

I don't remember my parents arguing over money but I do remember them worrying about it, ie whether they could afford things; they'd both been young during the Depression and I think it really affected them. And that attitude stayed with them for the rest of their lives. As for me - Chapter 7 at age 54, almost all credit card debt. I have no credit cards now and don't ever want another one.