Debt aversion: causes and implications in younger adults

Purpose First, we expand understanding of the causes of debt aversion, specifically, whether it is a preference in its own right. Second, we investigate the consequences of debt aversion for a range of debt products. Design/methodology/approach This exploratory, simultaneous, mixed-methods study uses financial, demographic, psychographic and interview data to investigate debt attitudes and usage among 70 Australians aged 18–40 years. Findings Debt aversion is primarily motivated by fear. Debt invokes psychological stress due to risks of exogenous events and the inability to control spending. Fears also centre on a lack of financial capability and loss of autonomy/freedom in life choices. Minimalist values are a separate, less common driver. Interviews confirm the importance of social learning for debt usage. Negative debt attitudes are associated with reduced usage of credit cards and home mortgages, but not student debt, informal debt or buy-now-pay-later products in the Australian context. Research limitations/implications Debt aversion is not a distinct preference, although attitudes are important for explaining debt usage. Practical implications Debt aversion is not a distinct preference, although attitudes are important for explaining debt usage. Originality/value We uncover a new connection between debt aversion and home mortgages in the Anglosphere. Anxiety about the ability to maintain autonomy and control spending is a crucial yet underappreciated source of debt aversion.