Managing Your Money

Some young adults think debt is 'cool'

A recent study by Ohio State University found that many young adults think debt is a good thing. They feel a boost to their self-esteem from carrying credit card and education debt.

Not all debt is bad, and there is some benefit to carrying debt and managing it well – you can boost your credit score which results in lower interest rates on future loans, and debt is a way to leverage your money. But there are also dangers to carrying debt. Sound financial management entails managing your debt wisely.

It seems that some young people may be enamored of their ability to acquire debt, as it makes them seem more adult. The study shows that some young people felt more in control of their lives and better able to achieve their goals. Those in the bottom 25 percent in total family income got the biggest boost from holding debt. But they may be the group that has the hardest time paying it off.

The study is alarming to me as a financial planner because it may lead these young people to acquire debt that could become burdensome in the future and impede them from reaching their financial goals. Learning to manage debt is similar to learning how to drive a car – you should start out slowly and carefully and learn to take control of the vehicle without it taking control of you.

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