Study: Young Adults Use Credit Cards to Boost Self-Esteem and a Sense of Control

The road to Chapter 7 bankruptcy for 20-Somethings is paved in only $7,000-$12,000 of credit card debt according to statistics from the Justice Department. The 25-29 age group has the second highest age demographic for bankruptcy at 15.2%, even though the demographic only makes up 8% of the population. How do so many 20-somethings find their way into financial ruin so early in life?

A new study from Ohio State, may have found a piece of the puzzle:

A study from Ohio State, published in May 2011 in the Journal of Social Science Research, found that when young adults from poor and middle-class backgrounds used student loans and credit cards to finance their uncertain lifestyles, they felt a temporary but powerful boost in self-esteem and in feelings of mastery over their environment.

“Young debtors experience debt as empowering,” wrote the sociologists who researched and wrote the study — lead author Rachel E. Dwyer and Randy Hodson of Ohio State, and Laura McCloud of Pacific Lutheran University. When young people in their early to mid-20s take advantage of their access to credit, they feel that they have “prepared themselves to meet the future — at least until the full requirements of repayment ensue.” (Do you know your credit rating? Take this quiz for an estimate.)

Clearly, this is not a healthy start to financial health and adulthood. Yet, it typifies the standard coming of age experience in America. It’s like thousands of students graduate college and then say “now what?” With nothing yet to lose, looking like an adult is as good a goal as any.

However, debt is something that is long-term; your situation in life is not. Marriage, children, buying a house, starting a career and living on your own, all come with unique and complicated financial responsibilities.Paying for what you did 10 years ago is going to strain you financially and psychologically.

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