Family debts cause mental health problems in kids

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When parents are struggling with money problems they may think they already have enough to worry about, but a report by The Children's Society has added to their woes: their research has found that parents are also endangering their children's mental health.

The report found that 2.4 million children in England and Wales are living in households with problem debts, and that parents carrying a number of debts were most likely to be inflicting damage on their children.

The reason that the number of debts matters is that they are likely to be juggling a large number of people they owe money to. This may mean they are being chased by utility companies, stores, banks and payday loan companies.

Children are alarmed by large number of letters, phone calls and visits from the bailiffs, and feel insecure that they could lose their home and belongings at any time. They are also distressed by family arguments over money.

This is in addition to the mental health issues associated with children simply not having enough money. For some children debt means not being able to socialise or take part in activities like sports or school trips, and missing out on birthdays, family gatherings and holidays. Children feel embarrassed for not owning things that are considered normal by their classmates, and guilty, anxious and a sense of failure for not being able to help their parents deal with their debts. This inability to help leaves them with lower self-confidence and self-worth.

One child told The Children's Society: "You can't have everything you want, but the little things we couldn't get [either] because of the money situation and my mum having to pay bills and paying off her debt." A 15-year-old young carer said: "I feel stressed and anxious about getting the money for [things]."

Almost a quarter of children in debt-ridden families (equivalent to more than 500,000 children) are unhappy with their lives. This means they are five times more likely to be unhappy than those in families without debt troubles.

Matthew Reed, Chief Executive of The Children's Society, said: "The misery that debt can cause parents is well documented but now we can also demonstrate the real damage it can do to children's mental health."

What can be done?

The Children's Society, as part of its Debt Trap campaign, is calling for an overhaul of the way household debts are treated, to give families the chance to get things back on track – and to make sure children do not have to pay the price of debt with their mental health.

The charity is campaigning for the Government to provide a 12-month breathing space for families in problem debt, giving them time to seek advice and set up arrangements to repay their debts at a rate they can afford, free of charges, mounting interest rates and visits from intimidating bailiffs.

Reed added: "Without Government action to give struggling parents time to get their finances in order children will continue to be the innocent victims."

In the interim, parents need to know there is help available. Debt charities like StepChange cannot suddenly 'magic up' a chunk of spare cash, but they can help struggling parents ensure they have claimed all the benefits they are entitled to.

They can also talk to the people they owe money to, and arrange a debt repayment plan, so that the interest is frozen, and the chasing calls and letters stop.

Finally, if things have gone too far to be dealt with by debt management, they can talk families through all their options. This will help ensure that even in the worst case scenario, they have the support they need to ensure the family can afford to feed and clothe the children, and protect them from the worst of the stress that comes from a serious debt problem.


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Most common causes of debt
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Most common causes of debt

There are some very common reasons for building up problem debts. Here we reveal seven of the most common, and what you can do if you face them.

Unemployment or illness that means one or more of the household’s earners are unable to work will bring a profound change in family finances, and according to the Money Advice Service is the most common reason for getting into problem debt.

If your circumstances change, therefore, you need to immediately address your family finances, and put everything on a minimum spend lockdown. You should also look into the benefits and tax credits that are available sooner rather than later, to try to close the gap.

If you are on the kind of contract that means varying hours, it can be incredibly difficult to work out what you can afford to spend - making it the second most common reason for getting into debt - according to the Debt Support Trust.

Rather than swinging through the extremes from week to week, the best approach is to establish a budget that will work in the leanest of months, so you don't find yourself getting used to the months when you work more hours.

According to Citizens Advice, trying to service too much debt is the third most common reason for getting into difficulties. The TUC found that those with problem debts spend 40% of their income on debt repayments.

If you are in this position, you officially need some help with your debt problems. If you continue to rob Peter to pay Paul, you will end up owing more and more, so you need to take stock and talk to a debt charity about all your options.

The double-whammy of the legal bills combined with the incredible cost of establishing two separate households is enough to make divorce or separation the fourth most common reason for going into debt - according to the Debt Support Trust.

There's no easy solution, but if you are going through this, it can be helpful to talk through your financial situation with someone you trust or a debt charity, who can help you balance a stretched budget.

Problem debts aren’t necessarily caused by a sudden shock to the system. According to the Money Advice Service, 20% of their clients are simply trying to live on an unsustainably low income.

If you are in this category, it’s important to seek help on the benefits and tax credits you may be able to receive. It’s not always easy to navigate the system, but charities like StepChange have experts on the benefits system who can talk you through what’s available.

The combination of rising costs and stagnating wages over the last few years has meant increasingly people saw their monthly wage cover less and less of their monthly outgoings. This position has started to ease more recently, but has left many people far worse off than before the financial crisis. The Money Advice Trust said a combination of this and unexpected costs was responsible for almost one in ten problem debts.

If you consistently spend more than you are expecting, it's well worth keeping a spending diary. That way you can establish the real cost of living, and start to identify where you can cut costs.

The Money Advice Service says it commonly deals with individuals who have struggled to get to grips with budgeting and debts, and have got into debt because they don’t have the skills and knowledge to manage their money effectively.

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