The birth of a child pushes parents to take loans. Why is this happening and is it worth going into debt for the sake of children?
Some parents take the phrase “my child should have the best of everything” too literally. According to our survey, almost half (46%) of American mothers take payday loans in Massachusetts or simply borrow money to provide their child with a decent life. Moreover, every third woman has to work overtime to pay off creditors. This survey involved 1,000 moms.
Why does having children force parents to change their financial behavior? The authors of the study suggest that the environment pushes parents to overspend, primarily by their behavior in social networks. 56% of the respondents admitted that the pressure of society (including in social networks) makes them enroll their children in many children’s clubs. 13% of the respondents stated that their own life seems to them less fulfilling than the life of friends and colleagues. At the same time, 91% of respondents claim that they have increased their spending on children not because they want to surpass other parents – they are just confident that it will be better for their child.
The main purposes of getting a loan for family Americans are repairs, buying a house or a car. At the same time, the motives for which people take out a loan are highly dependent on the financial situation of a particular family.
“For some Americans, a loan is the only way to improve their life: move to a new apartment, make car or home repairs, etc. And for someone, it is an opportunity to make their life much more comfortable. For example, to buy a car for a young mother so that she can take the child to the clinic or school.
At the same time, “the presence or absence of children has practically no effect on the client’s risk profile – this is overlapped by other factors (total income, age, education level, etc.
Some experts claim that borrowing money after the birth of children is unreasonable from the point of view of financial planning.
However, In the USA, getting a payday loan does not put so much pressure on the family’s budget due to lower rates than in other countries. Therefore, in Ireland or Greece, a payday loan can hit the budget hard.
Since the birth of a child does not happen suddenly, parents have time to prepare. During this period, you need to accumulate money for children’s health insurance and save some money just in case (a safety cushion).
An exception can be made only in an emergency: the child is seriously ill, and a large sum is urgently needed for treatment. When deciding whether to take out a loan, you need to clearly assess whether you will be able to repay it without prejudice to mandatory expenses (food, transportation, utilities, etc.).
An acceptable level of debt burden for each person is different. “For example, if your income is $1,000 a month and your average monthly expenses are $600, then a loan with a monthly payment of $250 is quite acceptable. But if your monthly income is $500, you spend $350 a month, and you have to pay $250 to the lender, then it is not clear how you can cope with such a load.
The excessive debt burden of parents has a negative effect on the child too. Borrowing money for a “decent children’s life”, parents a priori determine what it should be. This does not allow the child to live his/her life – he/she is forced to do what “will be best for him/her,” (in the opinion of mom or dad).
With age, the child grows a guilt complex towards the parents who took out loans for him/her, but he/she did not live up to their expectations. This situation is fraught with the fact that the child in the future will not be able to build his/her own family. Instead of caring for his/her own children, he/she will overprotect the mother to whom he/she “owes everything.” Another consequence is that such a child may develop a guilt complex in front of his/her children, which he/she has deprived of attention and resources, and the situation will be repeated.
Category: Finance
Tags: children, credit, funding issue, loans, parents
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Parents’ Debt: Should I Take Loans for the Sake of My Children?