Methods: We used the Panel Study of Income Dynamics-Child Development Supplement (PSID-CDS) in 2014. The sample included low-income families aged 18-64 with at least one child ages 3 to 17 and had a family income below 200% of the federal poverty line at the baseline. We used the CDS-BPI (Behavior Problems Inventory) index which includes developmental outcomes for children ages 3 to 17. We divided the respondents into four groups by sources of household income: from welfare benefit or work. The respondents’ income sources include welfare benefits, if they have ever received SNAP, Medicaid, TANF, or UI benefits. The debt issues divided into two categories: secured debts that are tied to an asset (e.g., home, education) and unsecured debts (e.g., credit cards, other debts). We tested all these variables using descriptive statistics and regression analysis.
Results: The findings show 7.1% of the Welfare only group, 61.8% of the Work only group, 12.8% of the Work and Welfare group, and 40.6% of the No Work/No Welfare group had secured debts. Also, 17.3% of the Welfare only group, 46.8% of the Work only group, 24.8% of Work and Welfare only group, and 27.5% of the No Work/No Welfare group had unsecured debts. The regression analysis indicates parents who has unsecured debts and income from both work and welfare are more likely to have children with higher BPI scores. Furthermore, informal income, being older, black were associated with increased BPI scores, whereas having a child more than two, higher than high school degree were associated with a statistically significant decreased BPI score.
Conclusion and Implications: Using nationally representative data, this study finds that unsecured debt is a significant indicator to increase adverse child development outcomes among low-income families. Unsecured debt is directly related to and used for family’s consumption and expenditure for their children; however, very limited research has been conducted regarding a child development among low-income families. By identifying that unsecured debts have negatively impacted child behavioral outcomes, we would suggest the need for financial education programs or improvement of income support programs to reduce these adverse outcomes.