Center on Assets, Education, and Inclusion

Recent findings using traditional regression methods show that children's savings designated for school are associated with higher math scores. We build on this research by using Hierarchical Linear Modeling (HLM) to confirm that children with school savings have higher math scores than those without school savings. Moreover, we suggest children's school savings may have a stronger association with children's math scores than with either household wealth or children's savings not designated for school. Further, we find evidence that children's school savings mediates the relationship between household wealth and math scores. Policy implications for children living in low-wealth households are discussed.

This article considers the processes through which parents' and children's wealth may influence children's academic achievements, and examines how these processes may vary across race and gender. It starts by reviewing existing research on the wealth-academic achievement relationship, and the role of college expectations in explaining this relationship. The study used 2002 data from the Panel Study of Income Dynamics (PSID), a national annual survey of US individuals and households, to examine wealth effects in relation to children’s maths and reading scores. The analysis sample included black and white children between the ages of 12 and 18 who were enrolled in a public school, giving a sample size of 1063. The data were analysed using multi-group structural equation modelling (SEM) to examine wealth effects on maths and reading scores by gender and by race. The results suggest that there are important statistical differences across race and gender. For example, children's school savings predict maths scores among white children but not black children. Net worth is a positive predictor of black males' maths scores but a negative predictor of black females'. In the case of income, the results find that it is directly related to black females' maths scores but not black males'. In general, the findings suggest that liquid forms of wealth (i.e., forms of wealth that are easily converted into cash) may be better predictors of children's academic achievement than net worth.

This study extends previous analyses in several ways. First, in addition to parental wealth, the relationship between children's wealth and math and reading scores are examined. Second, we examine different mediating pathways that wealth may affect children's math and reading scores in a single path analysis model. The advantage of path analysis over traditional regression analyses, which are typically used in this area, is that researchers can get a glimpse of relationships among variables. Furthermore, mediation can be tested more easily and extensively in path analysis compared to regression. Third, we examine whether different forms of wealth (net worth, homeownership, and children's savings for school) have different effects. Forth, we examine whether wealth (parental and/or children's) effects vary across racial groups.

In this study, we propose that children who have a savings account may be more likely to have higher math scores than children without a savings account. We find that children’s savings accounts are positively associated with math scores. Children with savings accounts on average score almost nine percent higher in math than children without a savings account. Further, results suggest that children’s savings accounts fully mediate the relationship between household wealth and children’s math scores. However, household wealth moderates the mediating relationship. We find math scores of low-wealth children increase by 2.13, middle-wealth children’s increase by 4.36, while high-wealth children’s increase by 6.59 points. Policy implications are discussed.