Center on Assets, Education, and Inclusion

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Credit cards are a fundamental component of households’ financial portfolios in the United States; however, overreliance on credit may contribute to financial setbacks. The potential for financial setbacks is particularly concerning among the current young adult generation that is accumulating higher amounts of credit card debt than preceding generations. These trends have led many researchers and policymakers to argue that financial education should become a fundamental component of public school curricula, assuming that financially educated young adults would make better, healthier decisions about credit. However, young adults’ credit card debt may be more than an individual phenomenon. A young adult’s street address—the community in which they grow up or live—can be a key factor in determining how they use credit. This study uses restricted-access, zip code data from a longitudinal sample of 748 young adult college students to examine whether the characteristics of the communities in which they grew up or lived prior to attending college relates to their outstanding credit card debt. A community’s characteristics, such as its unemployment rate and concentration of mainstream banks, have the strongest associations with a young adults’ credit card debt even after taking into consideration their financial education or whether their parents taught them about money as they were growing up. Findings help to understand how communities can be better capacitated to support young adults’ financial health.

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Friedline, T., West, S., Rosell, N., Serido, J., & Shim, S. (2015). Do community characteristics relate to young adult college students' credit card debt? The hypothesized role of collective institutional efficacy. Lawrence, KS: University of Kansas, Center on Assets, Education, and Inclusion.

Financial Inclusion Working Paper Year 2015