Individual debt, in all forms, is on the rise, and the staggering accumulation is having unforeseen and unintended consequences. To back up the claim that debt is rising, we point to outstanding credit card debt in the U.S., which is reaching $1 trillion for the first time. Combine this with poor personal financial management skills and knowledge and you have a difficult row to hoe. We are nearing the point where some children will be worse off than their parents — a situation few would have contemplated 20 years ago.
Families share the burden of debt, yet it disproportionately impacts children. Educational researchers suggest that 60 percent of a child’s success in school is related to the child's socioeconomic background. A child growing up in a financially insecure home is probably at a disadvantage in school. When a family is plagued with debt compounded by poor financial management skills, stress levels can become toxic. Parents may work longer hours to cover the debt obligation, thus reducing the time they can spend with their children. Children can feel less secure when their parents spend less quality time with them, which can lead to cognitive and behavioral issues in the classroom.
What lessons can be drawn from this? Perhaps the most significant are those that show up at the household and community levels. Importantly, individuals need to recognize that their financial decisions today could negatively impact their children tomorrow. Cycles of crushing family debt harm children. It is as simple as that. Often, going into debt to fund consumerism will hurt families and children.
Also, many families face financial hardship due to health problems and other unplanned issues. This fact, combined with the importance of socioeconomic background mentioned above, argues for an examination of which educational reform initiatives will ultimately successfully address rising community educational inequality. Here is a list of what we know works in communities and schools.
One, promote early childhood development programs. The developmental period between birth and 5 years old is critical for a child. It serves as a foundation for speech, cognitive processing and several other brain functions. However, financial insecurity often significantly impacts human development in negative ways during this period. Community-based programs that focus on helping children in these early years have proven to be very successful. For example, a child from a high-income household will hear almost 30 million more words spoken before the age of 4 than a child from a low-income household. When tested later, the children from wealthier homes had larger vocabularies, were better readers and had higher test scores.
Two, change the school day. The children of financially insecure families tend to spend less time on homework, less time reading and have a more difficult time participating in enriching educational experiences outside the classroom. The data suggest that after-school programs, extending the school day and activities that raise a student’s educational expectations can significantly improve a child’s performance in school.
Three, build parental involvement in schools. Education systems can help children succeed by increasing parental involvement in schools. This can be a challenge for parents who work long hours to simply maintain their households’ income. Some of the ways that schools have gone about increasing parental involvement are encouraging. They have started parents’ meetings early in the morning, late at night, in other languages, or even over the phone and internet to help parents stay involved in their children’s educations. These adjustments have been shown to positively impact students’ success.
A financially insecure household creates unintended challenges for educators, the community and most of all the students. Each parent should take time to carefully review their current debt, create a budget and develop a plan to reduce debt to a manageable level and to avoid putting loved ones at a disadvantage.
John Hoffmire is director of the Impact Bond Fund at Saïd Business School at Oxford University and directs the Center on Business and Poverty at UW-Madison. He runs Progress Through Business, a nonprofit group promoting economic development. Joseph Wright, Hoffmire’s colleague at Progress Through Business, did the research for this article.