The more young people owe as debt, the better they feel about themselves, according to new research from the United States. But those 28 and older tended to have lower self-esteem scores the higher their education debt was.

Is self-esteem caused by the purchasing power made possible by loans and credit cards? Are youngsters compensating for lost financial support from their parents, or complementing such support, with debt? What does it say about the cost of education and expectations about future salaries on one side (student loans), and about the attitude of buying things we do not need for money we do not have on the other side (“lifestyle” credit card debts)? Or is self-esteem making people more likely to take financial obligations which will, likely, be a heavy burden to carry for the years to come?

Not only do young people use debt to buy things they want, the more money they owe, the better they feel about themselves, according to new research from the United States.

A study of people ranging in age from 18 to 34, led by Ohio State University sociology professor Rachel Dwyer, found this to be most true among those who grow up in low-income families.

“Debt is a resource that people can use to get the things that they want,” Dwyer said, explaining how bigger debts coincide with higher self-esteem. “Those are things that you might even consider an investment, like education.”

The findings, published in the journal Social Science Research, surprised researchers, who expected higher self-esteem would be correlated with education-related debt but not with higher credit-card balances.

However, Dwyer noted that education-related expenses are often covered with credit cards, and “it could also be that people’s (self-esteems) are improved by having things that they wouldn’t otherwise be able to have without the debt.”

The study was based on an analysis of data and interviews involving 3,079 people across the U.S. over several years up to and including 2004. The information had been collected for the U.S. Bureau of Labor Statistics.

Dwyer said it’s possible that a similar analysis conducted now — following the debt-driven financial crisis that originated in the U.S. and affected the world economy in 2008 — would show less of a positive correlation between debt levels and self-esteem.

Diane Pacom, a sociology professor with the University of Ottawa, said the findings of this study likely would hold true in Canada and not be affected by the recent financial crisis. She said the study is reflective of the value industrialized nations all over the world place on a person’s ability to purchase.

“(People) are branded by the stuff that they buy,” she said. “There is the realistic thing that is happening in their minds: ‘I need money. I cannot survive in today’s reality, especially if my mother cannot pay for me. Therefore credit is my only way out.'”

Craig Alexander, chief economist for Toronto-Dominion Bank, said he’s not surprised by the findings, adding that young adults in Canada likely would show similar tendencies.

“Having access to financing does create a feeling of empowerment,” he said. “If you look at a lot of these youths, when they first leave home, they get their first credit card and they’re out in the real world as adults. It is very empowering to have greater control over what you’re doing with your life.”

The study found that subjects growing up in low-income families were most affected by debt in terms of having higher self-esteem, and it was seen with education and credit-card debt.

Young adults from middle-income families experienced higher self-esteem with more credit-card debt. Little effect was seen with regard to student loans, probably because it was the so common among their peers, the researchers theorized.

Those from the highest-income families showed no notable differences in self-esteem coinciding with credit-card or education debt.

“The wealthiest young people have the most resources and options available to them, so debt is not an issue for them,” Dwyer said.

Age was also a factor in the results, as those 28 and older tended to have lower self-esteem scores the higher their education debt was.

Dwyer said this could be reflective of people at this age starting to fully grasp the implications of owing large amounts of money. She added that they also may be earning salaries that are less than what they expected when they took on their student loans.

On why this effect wasn’t seen with regard to credit-card debts among the older subjects, Dwyer said it could be because school debt tends to be substantially more significant.


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