Children & Savings

Economic Socialization, Saving and Assets in European Young Adults

Paul Webley and Ellen Nyhus

Two studies were carried out, using data on the assets, economic socialization and dispositions of European teenagers and young adults. The sample of young adults (18-32) was drawn from a panel survey of the Dutch population. The Dutch sample size was 392, a significant proportion (over 25%) of whom were still living in the parental home. The sample of teenagers (mean age 14.4 years) and their parents was drawn from a three-generation study of economic socialization inNorway. The Norwegian sample size was 548 adolescents, 256 mothers, and 227 fathers. The Dutch study identified four distinct strands of economic socialization: providing pocket money, doing jobs at home, doing work for others, parental encouragement and advice. The results showed that parental encouragement (being taught budgeting and encouraged to save) had an impact on the economic orientation of young adults; those who had encouragement were better able to control spending, had a preference to save over spending, had an orientation to the future, were more conscientious and saved more. Those children who worked as adolescents, however, were less likely to plan to save the following year and more likely to be in debt. The Norwegian study found evidence that suggests there is a difference, though not a substantial one, in the economic socialization experience of adolescents who come from poorer and less educated backgrounds: they were less likely to receive pocket money and have part-time work but were introduced to piggy banks and savings accounts at a younger age.

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Contributions of Qualitative Research to Understanding Saving Theory for Children and Youth

Margaret Sherraden, Clark Peters, Kristen Wagner, and Baorong Guo

This paper explores contributions of qualitative research to saving theory for children and parents in children’s savings account (CSAs) programs. It brings together findings from three studies of CSAs, including: (1) parents of babies saving for college, (2) elementary school age children saving for college, and (3) youth transitioning from foster care saving for education and other purposes. Findings suggest that children, youth, and parents desire to save for the future, but face key obstacles including lack of knowledge and access to quality services. CSAs interact with developmental stages to motivate and facilitate saving. Accumulating savings has positive meaning for participants in CSAs for economic and psychological reasons. However, although CSAs overcome some saving obstacles, others remain, especially income flows, debt, and emergencies. The paper concludes with a discussion of theoretical and practical implications.

Saving in Childhood and Adolescence: Insights from Developmental Psychology

Annette Otto

This paper addresses variables related to child and adolescent saving and explains the development of skills and behaviors that facilitate saving from an economic socialization perspective. References are made to the differences between the economic world of children, adolescents and adults as well as to existing theories of saving. Children’s and adolescents’ ability and willingness to save are looked at, taking into account the social context of the family and general child and adolescent development.

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Testing an Asset-building Approach for Young People: Early Access to Savings Predicts Later Savings

Terri Friedline, William Elliott, and Gina A. Chowa

A major hypothesis of asset building is that early access to savings accounts leads to continued and improved educational and economic outcomes over time. This study asks whether or not young adults (ages 18 to 22), particularly lower-income young adults, are significantly more likely to own savings accounts and to accumulate more savings when they have access to savings accounts at banking institutions as adolescents (ages 13 to 17). We investigate this question using longitudinal data (low-to-moderate income sample [LMI; N = 530]; low-income sample [LI; N = 354]) from the Panel Study of IncomeDynamics and its supplements. Results from propensity score weighting and bivariate probit estimates support this hypothesis. Asset-building policies that extend early access to savings accounts may improve savings outcomes for young people from lower-income households. 

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Assets, Primary Education, & Secondary Education

Savings Accounts for Young Children in Low-Income Households: Findings from Qualitative and Quantitative Research with Parents

Deborah Adams and Edward Scanlon

There is evidence that children in low-income households have better educational outcomes when assets are present, and that assets work in part through parental educational expectations. One approach to reducing disparities in educational outcomes may be to support low-income parents and children in their efforts to build savings for college. Theoretical work on the role of institutions in saving suggest that we can help people build assets for the future by designing policies and programs that make “savings” happen without constant attention to one’s own “saving” behaviors. In this paper, we discuss findings on individual and institutional factors in building assets from a series of related studies on the Saving forEducation, Entrepreneurship, and Downpayment (SEED) initiative that address parent experiences with saving for their pre-school and primary school age children. SEED is a national policy, practice, and research initiative designed to test the efficacy of progressively funded asset-building accounts for children and youth in the US. The studies covered in this paper were conducted in the first four years of the SEED initiative by a team of researchers from the University of Kansas,along with colleagues at other universities and institutes, at 12 community-based children’s savings programs in the US andPuerto Rico. This is the first paper to our knowledge that discusses findings addressing individual and institutional factors in asset building from qualitative and quantitative studies of low-income parents whose young children have assets for the future in savings accounts.

Parental Educational Expectations by Race and Hispanic Origin: Evidence from the SEED OK Experiment

Youngmi Kim, Michael Sherraden, and Margaret Clancy

Research has linked parents’ educational expectations to children’s educational attainment, but findings regarding differences in educational expectations by race/ethnicity have been inconsistent. In addition, existing studies have focused on school-age children and their parents. In this study, we examine educational expectations of parents of infants using a state representative sample. A series of logistic regressions are conducted for the full sample (N=2,597)and for individual racial groups to investigate parental educational expectations by race and Hispanic origin. The study finds that non-Hispanic Whites and Asians hold higher educational expectations for their children compared to AfricanAmericans, American Indians, and Hispanics. However, these differences by race/ethnicity disappear when demographic and socioeconomic measures are controlled. Of economic measures, financial assets and health insurance coverage are significantly associated with parental educational expectations. Also, separate analyses by minority group status find different patterns of association between key determinants and educational expectations. Implications for research andpolicy are discussed.

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Ten-year Impacts of Individual Development Accounts on Education: Evidence from a Randomized Experiment

Michal Grinstein-Weiss, William Gale, William M. Rohe, Mark Schreiner, and Clinton Key

This paper presents evidence from a randomized field experiment testing the impact of a short-term matched savings program on educational outcomes 10 years later. We examine the effect of an Individual Development Account (IDA)program on educational enrollment, degree completion, and increased education level. The IDA program, which ran from 1998 to 2003 in Tulsa, Oklahoma, provided low-income households with financial education and matching funds for qualified savings withdrawals, including a 1:1 match for educational uses. We find a significant impact on education enrollment and positive but non-significant impacts on degree completion and increase in level of education. We also examine the interaction between gender and treatment assignment and find that the IDA had a strong positive effect on increased educational attainment for males, but not for females.

The Impact of Household Possessions on Youth’s Academic Achievement in the Ghana YouthSave Experiment: A Propensity Score Analysis

Gina Chowa, Rainier Masa, Christopher Wretman, and David Ansong

Families play an important role in children’s academic achievement. Household assets as part of children’s family background have been found to have a significant impact on children’s academic achievement. In this study, the impact of household possessions on youth’s academic achievement in the Ghana YouthSave experiment is investigated. Because household asset ownership is predicted by parental characteristics, we only included youth whose parents were interviewed at baseline. Thus, the study sample is 3,087 pairs of youth and their parents. The results show that youth from families that reported owning at least one of the five household items scored almost 3 units higher on Math and 3.50 units higher onEnglish than their peers from families that did not own any of the five household possessions. Based on the regression of difference scores, youth from families with household possessions scored 3.17 units higher on Math and 3.66 units higher on English than youth from families without any household possessions. Using matching estimators, we found that youth from families with household possessions scored 3.66 units higher on Math and 4.37 units higher on English than their peers from families who reported not owning any of the five household possessions identified in our study. The consistent statistically significant findings across different tests used in this study suggest that the effect of household possessions on academic achievement is robust. Policy implications are discussed.

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Theories of Asset Effects

From Assets to School Outcomes: Implications of Identity Based Motivation

Daphna Oyserman

American children almost universally aspire to college but often fall short. High school dropout is associated with macro-factors – social stratification and low socioeconomic position (low education, low income, membership in racial-ethnic minority groups). These macro-level factors (termed social determinants of academic disparities)differentially expose people to academic attainment undermining versus attainment-promoting contexts and to choice and control over their lives. These macro-level factors also subtly influence likelihood of college entry and completion.Identity-based motivation (IBM) theory (Oyserman, 2007, 2009a, 2009b) helps articulate how these social determinants matter at the micro-level. Social determinants influence whether or not a behavior or choice feels congruent with important identities. Identity-congruence influences whether strategies are chosen and difficulty is interpreted as meaning that effort is important and meaningful or pointless and “not for people like me.” In the same way, lack of choice and control undermine identity-based motivation making interpretation of difficulty as meaning impossibility more likely and reducing belief that one’s action and effort matter.

Integrating Resource-based and Person-based Approaches to Understanding Wealth Effects on School Achievement

Mesmin Destin

Wealth and assets have a reliable positive relationship with the achievement outcomes of students. Various approaches
to understanding student achievement may inform the understanding of how wealth seems to influence children’s educational experiences. This paper describes several perspectives from the student achievement literature within the fields of economics and psychology that are categorized as either resource-based or person-based. Resource-based approaches prioritize the importance of investments that are made in youth to enrich contexts, expand opportunities, and improve outcomes. Person-based approaches, on the other hand, focus on how beliefs, values, and perceptions shape achievement.To better understand wealth effects, an integrative framework presents identity as a unifying construct that is contextually constructed through a combination of resource- and person-based influences to drive student motivation and achievement.

Assets, Economic Opportunity, and Toxic Stress: A Framework for Understanding Child and Educational Outcomes

Trina Williams Shanks and Christine Robinson

A large body of evidence indicates that socioeconomic status (SES) is a strong predictor of school achievement, college graduation and child outcomes in general. Better developmental and health outcomes are strongly associated with family assets; families with greater wealth, more income, more years of education, steady professions, as well as living in neighborhoods rich with services and supportive networks. We introduce a model incorporating a range of theoretical and empirical literature about the relationships between a household’s socioeconomic situation, household interactions, and child educational outcomes. The intention is to illustrate how these frequently cited factors are exacerbated by and aligned with stress or difficult circumstances which cause long-term difficulties for children in high-risk circumstances. Finally, we modify the model to illustrate the dynamic nature of these relationships, highlighting how the developmental trajectory

of a child who lives with toxic stress might differ from a comparable child with social supports in a situation of low or tolerable stress. 

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The Impact of Youth Debt on College Graduation

Min Zhan

This study examines the associations between educational loans and credit card debt with the possibility of college graduation among a group of youth who enrolled in college. It further investigates whether the associations differ by levels of parental assets. Results indicate that, after parental assets and other variables are considered, educational loans are positively related to college graduation; however, there is evidence that educational loans above $10,000 reduce the probability of college graduation. Parental assets are positively linked to youth’s college graduation, and the relationship between educational loans and college graduation is stronger among youth whose families have lower levels of financial assets. Credit card debt is positively related to college graduation only among families with modest financial assets. Policy implications are discussed. 

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Assets and Postsecondary Education

Intergenerational Transmission of Educational Attainment: The Role of Household Assets

Jin Huang

Intergenerational transmission of education from parents to children has been investigated extensively, and the parent child correlation of schooling is about .46 in the US. A high intergenerational persistence of educational attainment is not only an indicator of educational inequality but also a barrier to equal opportunities in the labor market and beyond. This study uses data from the Panel Study of Income Dynamics (PSID) to generate a sample of two cohorts of white children(’84 and ’94 cohorts), and examines whether intergenerational transmission of education varies by household economic resources, especially household assets. Results show that, in the ’94 cohort, financial assets increase the parent-child association of schooling for male children, but decrease the parent-child association for female children. In addition,financial assets and net worth have a negative interaction effect with parental education on female child’s educational attainment as measured by college completion. Research and policy implications of the findings are discussed.

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Asset Accumulation and College Outcomes

Vernon Loke

The effects of assets may be understood in terms of its possession, accumulation, or spending. There is a growing body of research supporting the association between assets and better educational outcomes for children. Much of this work had focused on the effects of the presence of assets, or of the quantum of assets possessed. Little is known, however, about the effects of the process of asset accumulation. This paper extends the knowledge base on assets and its effects on educational outcomes. It examines the effects of membership in different asset accumulation trajectories on children’s college outcomes. The data suggest that children from households with low asset holdings which did not experience significant asset accumulation over time had poorer college outcomes. Factors moderating this relationship are explored, and the implications of the findings are discussed. 

“You Pay Your Share, We’ll Pay Our Share”: The College Cost Burden and the Role of Race, Income, and College Assets

William Elliott and Terri Friedline

Changes in financial aid policies may place too much of the burden of paying for college on students. In addition,incentives for accumulating college assets may exacerbate the college cost burden on minority and lower-income students.Our study investigated the impacts of these policy changes on college cost burden using trivariate probit analysis with predicted probabilities. We find that recent changes in the financial aid system place a higher responsibility on AfricanAmerican, Latino/Hispanic, and moderate-income students to pay for college themselves. An implication is that greater opportunities for more and higher dollar grants and scholarships at 4-year colleges are needed for African Americans.Further, there is a need to create more grants and scholarships that target Latino/Hispanic students as well as moderate-income students at both 2-year and 4-year colleges. We also find that students are less likely to pay for college with student contributions when parents open a savings account, start a state-sponsored savings plan, or open a college investment fund. However, nonminority and higher-income families are more likely to have college assets than their counterparts.Therefore, we suggest an additional strategy to reduce the college cost burden on students is to create policies that will encourage accumulation of college assets among minority and lower-income families. 

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The Effects of College Savings on Postsecondary School Enrollment Rates of Students with Disabilities

Greg Cheatham and William Elliott

This is the first study to examine whether parents’ college savings is positively associated with special education students’ enrollment in postsecondary school. In addition to examining postsecondary school enrollment among students with disabilities, we also examine whether students’ and parents’ college expectations act as a mediator between parents’ college savings and postsecondary school enrollment. We find that while not all types of college savings are associated with postsecondary enrollment, college bonds are a consistent and strong and statistically significant predictor of postsecondary enrollment for students with disabilities. Further, we find evidence that students’ and parents’ college expectations act as

a partial mediator between college bonds and enrollment in postsecondary school. An implication of this study is that programs that encourage some types of asset accumulation are likely to improve postsecondary school attendance rates among students with disabilities by providing them with money to pay for college and by making postsecondary school appear within reach. 

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