Young adults are in a position to save for their future but sometimes lack the financial literacy, which in turn can affect their confidence in accumulating wealth and becoming more independent in life.
Dwyer, McLeod, and Hodson have conducted research about this topic and found that young adults have a different perspective on debt. For example, some focus on credit being necessary and creates opportunity while others perceive that credit will inhibit future achievements and cause a sense of powerlessness.
Debt is known to be class stratified, according to authors Dwyer, McLeod and Hodson. For example people with a lower income use debt to cope and people with a higher income use debt to attain wealth. There is good debt and bad debt. Good debt is used when the goods appreciate and bad debt is when the goods depreciate.
Researchers suggest that some people have increased self-esteem and self-concept due to debt as it is a source to invest and reach financial wealth. However, if a person has a lack of financial literacy can use debt incorrectly, that can lower their self-concept and self-esteem. Therefore, the concept of a person having a sense of mastery over debt and confidence in debt and overcoming it can depend on their perception, which may be influence by the socio economic status.
Researchers Dwyer, McLeod, and Hodson identified that young adults experience debt positively as it makes them feel in control of their money and gives them higher levels of self-esteem. Moreover, wealthy young adults don't experience negative effects on the self-concept when in debt as they have more options to manage it.
Debt affects young people differently, depending on their social status and options available. For example, a person with low income and bad credit won't be able to find a loan with lower interest or consolidate their loans, while a person with high income may have those options. A person with high income may be able to fix their credit rating and have more options available. These outcomes influence sense of mastery and self-esteem.
The outcome means that there are several variables to consider when thinking about how a person feels about debt.
Source: Dwyer, R.E., McCloud, L., & Hodson, R. (2011). Youth debt, mastery, and self-esteem: Class-stratified effects of indebtedness on self-concept. Social Science Research, 40, 727-741.