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5 July 2012

Responsible Parents + Financial Education = No Credit Card Debt

Keywords: education, income, parents, North America, family communication, money expenditure, survey, young adults,

Parents and financial education play an important role in preventing risky financial behavior among students, a study in Journal of Public Policy and Marketing shows. For example, students with better financial knowledge are less likely to have credit card debt. 

Take aways

  • Parents play an important role in students' financial behavior: They can set a standard for responsible financial behavior, which in turn prevents risky credit card behavior among students.
  • Students with better financial knowledge are less likely to have credit card debt, because they are less inclined to engage in risky borrowing (e.g., maximizing credit card limits) and risky paying behaviors (e.g., not paying off credit card debt). 
  • Therefore, financial education seems a successful tool in preventing risky financial behavior among students. 

Study information

  • The question?

    Which factors determine students’ risky credit card behavior? 

  • Who?

    1,242 first year students with a credit card (60% women, 40% male, primarily white)

  • Where?

    USA

  • How?

    Students completed a questionnaire about their credit card behaviors and their views on responsible and risky financial behaviors. They also answered questions about the income and education level of their parents and their financial knowledge. 

Facts and findings

  • Students with better knowledge of financial matters:
    • were more positive about responsible financial behaviors (e.g., pay off debts, saving),
    • were more confident about their own ability to control their finances, 
    • believed that their finances were manageable, 
    • were more likely to conform to their parents’ standards regarding responsible financial behavior
    • and, consequently, were less likely to participate in risky credit card behavior (e.g., maximizing credit card limit, not paying off credit card debts). 
  • Students whose parents had a higher educational background and income:
    • were more positive about responsible financial behaviors 
    • were more likely to conform to their parents’ standards regarding responsible financial behavior
    • and, consequently, were less likely to participate in risky credit card behavior 
  • Extra fact: The average credit card debt of the students in this study was $202.