Lots of Debt Makes Young People Feel Like They're in Control

By Valerie Ross | June 8, 2011 1:27 pm

Money can’t buy happiness—but debt might just be able to rent you self-esteem, a new study suggests.

Being in the red seems to boost the self-confidence of people in their early-to-mid twenties, the researchers found. Using all sorts of data—financial, psychological, educational, you name it—collected every two years from 3,000 young adults as part of an enormous national survey, they were able to pick out this pattern: The more credit card debt and college loans young adults had, the higher their self-esteem and the more they felt in control of their lives.

Even when the researchers took starting self-confidence into account—young people with higher self-esteem might be more willing to take out loans in the first place, for instance—the pattern remained. It’s not clear cause and effect, since the researchers couldn’t make some of the kids go into debt and the others say solvent, but it does suggest that being in debt may actually improve self-esteem.

Um, what? Are these people’s bills somehow way more fun than ours?

Part of the effect is due to the fact that debt, especially school loans, are an investment the future, the researchers hypothesize. You’ve got to spend money to go to college to get a job that will make you money. Makes sense. But credit card debt seemed to buoy the twentysomethings’ self-esteem the same way. “They may feel good about their debt only because it allows them to buy the things they want without having to delay gratification,” sociologist Rachel Dwyer, one of the researchers, said in a prepared statement. In other words, getting what you want when you want it makes you feel awesome, especially if you can pay for it later.

Right around that fateful 30th birthday, however, the stress of owing tons and tons of money seemed to kick in. Starting at age 28, the more debt people had, the bigger a hit their self-esteem took. This may be because if you ask an 18-year-old with a credit card how much money they expect to making by the time they reach the distant age of 30, they’ll probably put the figure at around a bajillion dollars. By their late 20’s, these folks “may be realizing that they overestimated how much money they were going to earn in their jobs,” as Dwyer puts it. “When they took out the loans, they may have thought they would pay off their debts easily, and it is turning out that it is not as easy as they had hoped.”

So: Owing money makes you feel empowered, because you use it to go to college and buy stuff. Paying that money back, for years, makes you feel not so great.

Image: Flickr / Andres Rueda

  • http://therealkatie.net Katie Cunningham

    Also, young people have yet to have enough time for Bad Luck to strike, and for those debts to suddenly become a crushing weight. Also, as you get older, you stand to lose more when you hit financial downturns.

    At 20 and single: Get your credit rating screwed up. Maybe lose an apartment. Bummer.

    At 40, married with kids: Your whole family is upended. The kids are pulled from their expensive extra-curricular activities. Your spouse looks into getting overtime. You face losing your house, being forced to move, forcing your kids into new schools, forcing your spouse to commute longer to work. The topic of divorce looms.

    More than a bummer.

  • http://Crumblingsanctuary.blogspot.com Vogie

    Yeah, I’ll have to agree with Katie. That kinda makes sense, and it doesn’t have much to do with debt so much as life expectancy and what you’re focused on.
    My sister and her husband are just 3 years younger than we are, and they’re attending -Cons, buying video games by the pair and having a ball. Me & my wife are in the same boat, financially, but since we have children, it’s a whole different ball game. Not only is it more mouths to feed, but where they’re killing subscription-based dragons, We’re feeding mutual funds and trying to live off of one of two incomes so we can pay off the grad school loans as fast as possible. It’s two different worlds even though they’re in early 20s and we’re in mid-20s.

  • http://www.twitter.com/flosciences FLOSciences

    I agree with the study. I’m in graduate school with probably more debt that my peers. I do justify living (slightly) beyond my means (and therefore happier) because I will be making more than enough money when I finish school. Sure, I’ll have live a little below my means then, but if I’m a little more happy now its worth it. That is, maybe I’ll have to live in an apartment for a year after getting a high paying job so I can pay off my debt, and delay getting a house, but if my years of graduate school are more bearable that OK with me.

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