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“Parental Duty”: Is It Worth Taking Loans for the Sake of Children?

Parental Duty Is It Worth Taking Loans for the Sake of Children

The birth of a child pushes parents to get loans, it turned out in a survey conducted in Illinois by ROCHESTERfamilies.com. Why is this happening and is it worth going into debt for the sake of children?

Some parents take the phrase “my child should have the best of everything” too literally. Almost half (47%) of American mothers take online payday loans Illinois or simply borrow money from friends to provide their child with a decent life, our information portal found out. Moreover, every third woman has to get a second job to pay off creditors. Our survey involved 1,000 moms.

Americans also start to use payday loans more often after marriage. 51% of families in Illinois use either a credit card or a payday loan, financial experts say.

How do children influence their parents’ financial behavior?

The authors of the study suggest that the environment pushes parents to spend more money, primarily by their behavior in social networks. 61% of the respondents admitted that the pressure of society (including in social networks) makes them enroll their children in many clubs. 16% of the respondents said that their own life seems to them less fulfilling than the life of friends and colleagues. At the same time, 89% of respondents claim that they have increased their spending on children and taking out loans not because they want to surpass other parents – they are just sure that it will be better for their child.

The main purposes of getting a payday loan for an Illinois family are repairs, buying a house or a car, the survey found out. At the same time, the reasons why people take out a payday loan are highly dependent on the financial situation of a particular family.

“For some Americans, a payday loan is the only way to improve their lives: move to a new apartment, make home repairs, etc. And for someone, it is an opportunity to make their life much more comfortable. For example, buy a car for a young mother so that she can take the child to the club or school,” researchers explain.

Is this the right approach?

At the same time, “the presence or absence of children has practically no effect on the client’s risk profile – this is overlapped by other factors (total income, age, education level, etc.),” according to the survey.

Nevertheless, whatever the parents’ motives, borrowing money after the birth of children is unreasonable from the point of view of financial planning, financial experts are sure.

Since the birth of a child, unlike pregnancy, does not happen suddenly, parents have time (usually about 7 months, when a woman can work) to prepare. During this period, you need to accumulate money for a child insurance policy and get a “safety cushion” in the amount of 3-6 months of family income.

An exception can be made only in an emergency situation: the child is seriously ill, and a large sum is urgently needed for the treatment. When deciding whether to take out a payday loan, you need to clearly assess whether you will be able to repay it without prejudice to mandatory expenses (food, transport, utilities, etc.).

The acceptable level of debt burden for each person is different. “For example, if your income is $1,500 a month, and your average monthly expenses are $900, then a $500 payday loan is quite acceptable for you. But if your monthly income is $700, you spend $500 a month, then it is not clear how you can cope with a $500 loan.

The excessive debt burden of parents has a negative effect on the child. Borrowing money for a children’s “decent life”, parents a priori determine what it should be. This does not allow children to live their life – they are forced to do what, in the opinion of their parents, “will be best for them,” experts say.

As the child ages, a guilt complex grows in front of the parents who took out loans for him/her, but he/she did not live up to their expectations. According to psychologists, this situation is fraught with the fact that children in the future will not be able to build their own families. Instead of caring for their own children, they will overly patronize the mother to whom they “owe everything.” Another consequence is that such children may develop a guilt complex before their children if they do not have enough money for the “best possible life”.

Families with children are twice as likely to take loans

Illinois families with children take loans twice as often as other Americans; as a result, 52% of families have a loan, according to our study.

Analysts also recorded a steady tendency of families in this state to take out mortgages after the birth of their second child.

According to the statistics, banks increased lending to the population by 13.2% in 2019, and by 22.8% in 2020. According to the forecast, the growth of lending to the population in 2021 will be 15-20%.

Since the beginning of the summer, the US authorities have been hotly debating the role and significance of personal lending in Illinois. Bank representatives said in June that the high debt load of the population does not mean that a bubble appears in the personal lending market, it is a consequence of the low living standards of people.

Banks said in mid-July that the rapid growth in Illinois personal lending in the past two years was objective against the backdrop of powerful one-off factors and is still quite far from exhaustion. Banks see the accelerated growth of nominal wages in 2021 as the most important factor in the growth of lending, especially in the lowest-paid categories. In addition, a significant drop in the cost of loans plays an important role in the growth of personal lending volumes – by the summer of 2021, rates dropped to less than 15%, bank specialists emphasized.

A third of Illinois families take loans to get their children ready for school

Most Illinois families lack their own funds to get their children ready for the start of the school year. Such results were shown by a study of the online loan service, conducted among parents of schoolchildren. More than two thousand respondents from Illinois took part in the survey.

So, only 33% of the respondents said that they do not need outside help to buy school goods – they cope on their own.

Due to the beginning of the school year, 35% of the respondents ask for financial support from relatives and friends.

29% of families apply for banking products: they either take payday loans or use credit cards. Another 4% of the respondents apply for bank loans to get their children ready for school.


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