This study examines savings from childhood to young adulthood with a sample of 14,223 individuals from the 1996 Survey of Income and Program Participation (SIPP). We employed a cohort sequential accelerated latent growth model that combined a series of cohorts to represent a common developmental trajectory spanning 19 years—ages 16–35—and accounted for relevant covariates. Descriptively, the proportions of savings account ownership increased steadily between ages 16 and 30 and then leveled off. In other words, a critical time for intervention may occur between ages 16 and 30 when the proportion of account ownership is increasing. Proportions of savings accumulation also rose steadily, with a mean low of $636 between ages 16 and 20 to a mean high of $1,160 between ages 31 and 35. Gender, race, employment status, and household income and net worth were associated with initial variability in savings at ages 16–20 and rate of change in savings over time through age 35. Results can inform policies and programs that open savings accounts for children as a way of helping them remain financially secure across their life course.
Friedline, T., & Nam, I. (2014). Savings from ages 16 to 35: A test to inform Child Development Account policy. Poverty & Public Policy, 6(1), 46–70.
A question of interest in children’s savings research asks whether there are unique effects on children’s later savings when savings accounts are opened in their names earlier in life, either independently from and or simultaneously with accounts in which parents save on children’s behalf. Using longitudinal data from the Panel Study of Income Dynamics, this study created a combined measure of children’s (ages 12–19) and parents’ savings account ownership to predict savings outcomes in young adulthood (ages 20–25). All possible combinations of children’s and parents’ account ownership were significantly related to young adults’ savings account ownership; however, only children’s savings account ownership was significantly related to savings accumulation. Implications for the independent effects of savings accounts in children’s names are discussed.
Friedline, T. (2014). The independent effects of savings accounts in children’s names on their savings outcomes in young adulthood. Journal of Financial Counseling and Planning, 25(1), 69–89.
Understanding the balance sheets of today’s young adults—particularly the factors that set them on a path to financial security through asset diversification and accumulation—lends some insight into the balance sheets they will have when they are older. This study uses panel data from the Census Bureau’s 1996 Survey of Income and Program Participation to investigate the acquisition of a savings account as a gateway to asset diversification and accumulation for young adults. Two avenues were considered: The first emphasized ownership of a diverse portfolio of financial products, and the second emphasized the accumulated value of liquid assets. Almost half of the surveyed young adults owned a savings account (43 percent) and approximately 3 percent acquired a savings account over the course of the panel. (Older, nonwhite, or unemployed participants were significantly less likely to acquire an account.) Those who owned or acquired a savings account also had more diverse asset portfolios. Evidence suggests that young adults who acquire a savings account and diversify their asset portfolios may also accumulate more liquid assets over time, which can be leveraged in the future to strengthen their balance sheets.
Friedline, T., Johnson, P., & Hughes, R. (2014). Toward healthy balance sheets: Are savings accounts a gateway to young adults' asset diversification and accumulation? Federal Reserve Bank of St. Louis Review, 96(4), 359-389.
Amidst concerns about percentages of households that remain unbanked or underbanked, policy endeavors have emerged to promote financial inclusion by making financial products such as savings accounts readily available. While these endeavors have primarily concentrated on households, young people may be the front lines of financial inclusion because they may be more likely to be banked in young adulthood and beyond when they start off with savings accounts earlier in life. This article addresses young people's financial inclusion by comprehensively reviewing 60 research studies on young people's savings, discussing the role of the family in young people's financial inclusion, discussing financial inclusion from an institutional perspective, presenting policy implications, and identifying gaps in knowledge and opportunities for research. Policies that open savings accounts for young people early in life may be a promising strategy for extending financial inclusion and preventing unbanked or underbanked status later in life.
Friedline, T., & Rauktis, M. (2014). Young people are the front lines of financial inclusion: A review of 45 years of research. Journal of Consumer Affairs, 48(3), 535-602.
Child Development Accounts (CDA) aim to open savings accounts in childhood as a way to lay a foundation for building assets in young adulthood and beyond. Mainstream banks may be key partners in opening the accounts in which children can build assets. While children may have limited savings to invest initially, they may increasingly invest over time by accumulating assets and debts through mainstream banks. Mainstream banks may benefit from children's increasing investments. This paper uses propensity score weighted, longitudinal data from the Panel Study of Income Dynamics and its supplements to examine savings, assets, debt, and net worth accumulation of young adults and whether or not they accumulate more when they have savings accounts as children. Young adults accumulate a median of $1000 in savings accounts, $4600 in total assets, $965 in debt (excluding student loans), and $4000 in net worth (excluding student loans). Young adults accumulate more savings and total assets when they have savings accounts as children. They accumulate less debt and more net worth when their households accumulate high net worth.
Friedline, T., & Song, H. (2013). Accumulating assets, debts in young adulthood: Children as potential future investors. Children and Youth Services Review, 35(9), 1486–1502.
Friedline, T., & Song, H. (2013). Children as potential future investors: Accumulating assets, accumulating debts in young adulthood (Report II of III). Lawrence, KS: University of Kansas, School of Social Welfare, Assets & Education Initiative.
Friedline, T., & Elliott, W. (2013). Children as potential future investors: Connections with banking institutions and diverse asset portfolios in young adulthood (Report I of III). Lawrence, KS: University of Kansas, School of Social Welfare, Assets & Education Initiative.
Friedline, T. (2013). Children as potential future investors: Do mainstream banks augment children's capacity to save? (Report III of III). Lawrence, KS: University of Kansas, School of Social Welfare, Assets & Education Initiative.
A central hypothesis of Child Development Accounts (CDA) suggests that savings accounts in childhood lay a foundation for connecting to mainstream banking institutions and diversifying asset portfolios in young adulthood and beyond. While children may have limited savings to invest initially, they are financial actors who may increasingly invest money into different types of savings products over time. This paper uses propensity score weighted, longitudinal data from the Panel Study of Income Dynamics and its supplements to examine the types of financial and nonfinancial assets owned by young adults and whether or not they are more likely to own these assets when they have savings accounts as children. The most commonly owned assets in young adulthood included savings accounts (89%), vehicles (54%) and credit cards (51%). Smaller percentages owned stocks (9%), bonds (6%), and homes (8%). On average, young adults owned two to three different assets. Having savings accounts in childhood was associated with being two times more likely to own savings accounts, two times more likely to own credit cards, and four times more likely to own stocks in young adulthood, compared to not having savings accounts in childhood. Young adults' ownership of more total financial assets was also associated with having savings accounts in childhood. Findings provide some supporting evidence of demand for children's savings accounts. Policy endeavors that remove barriers to account ownership may be advantageous for children and mainstream banks.
Friedline, T., & Elliott, W. (2013). Connections with banking institutions and diverse asset portfolios in young adulthood: Children as potential future investors. Children and Youth Services Review, 35(6), 994-1006.
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 18-22) in 2007, particularly among lower income households, 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 13-17) in 2002. 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 Income Dynamics 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, which hopefully affords them with the economic resources needed to lead productive and satisfying lives.
Friedline, T., Elliott, W., and Chowa, G. (2013). Testing an asset-building approach for young people: Early access to savings predicts later savings. Economics of Education Review, 33(1), pp. 31-51.
Parents transfer many forms of advantage to children based on their financial resources. Of interest is whether parents transfer educational and financial advantages and whether this occurs early in life. This paper examines financial advantage by asking whether children's own savings—apart from that of their parents—can be predicted by a separate measure of parents' savings for their child. This study predicts children's basic and college savings at ages 12 to 15 with separate samples from low-to-moderate- (LMI; N = 333) and high-income (HI; N = 411) households using Panel Study of Income Dynamics and Child Development Supplement data. Propensity score weighting and logistic regression results find that parents' savings for their child is significant in both household types. Given this, policies that aim to include children in savings may help reduce transfers of financial advantage and, ultimately, educational advantage.
Friedline, T. (2012). Predicting children's savings: The role of parents' savings for transferring financial advantage and opportunities for financial inclusion. Children and Youth Services Review, 34(1), 144–154.
In this study we examine predictors of adolescents' savings account ownership and use of mental accounting with a nationally representative, longitudinal sample of 744 adolescents ages 12 to 15 using Panel Study of Income Dynamics and Child Development Supplement data. We find sizable savings gaps along class lines. Further, findings suggest adolescents are more likely to have savings and use mental accounting when their parents have higher levels of education and have savings for them. Given that parents' education level and parents' savings for their child are directly related to adolescents' own savings, we suggest that traditional banking markets may not be able to equalize the advantage provided by having savings as an adolescent.
Friedline, T.*, Elliott, W., and Nam, I. (2012). Predicting savings and mental accounting among adolescents: The case of college. Children & Youth Services Review, 34(9), 1884-1895.
Friedline, T. (2012). The case for extending financial inclusion to children: The role of parents’ financial resources and implications for policy innovations. Washington, DC: New America Foundation.
This paper explores predictors of young adults’ savings using propensity score analysis and logistic regression with separate, longitudinal samples of whites and blacks aged 17–23 from the Panel Study of Income Dynamics. We ask who saves among adolescents and young adults and whether the likelihood of having a savings account and the amount saved in young adulthood can be predicted by two factors: (1) having a savings account during adolescence and (2) having families who own assets. The majority of white (90%) and black (64%) young adults had savings; however, blacks saved about 3% the amount saved by whites, suggesting that young adults’ savings may be patterned after disparities in the distribution of assets and families may transfer a financial advantage to young adults. Logistic regression results find that among whites, future orientation was a significant predictor of having a savings account in young adulthood. A notable trend level finding was that white young adults were more likely to have a savings account when they had a savings account as adolescents. Among blacks, academic achievement and household size were significant predictors of having a savings account in young adulthood. If confirmed in future research, findings suggest that Children’s Development Accounts may be one way to reduce racial disparities in savings by intervening at a young age and providing universal accounts to improve savings across the life course.
Friedline, T.* and Elliott, W. (2011). Predicting savings for white and black young adults: An early look at racial disparities in savings and the potential role of children's development accounts (CDAs). Journal of Race and Social Problems, 3(2), 99-118.
This paper examines the progression of savings between adolescence and young adulthood. Using data from the Panel Study of Income Dynamics, we ask whether adolescents with a savings account and parents who have assets significantly predict having a savings account and the amount saved in young adulthood. Descriptive statistics reveal that adolescents have savings accounts more often when they are White, employed, and live in households where the head is married, has more education, and owns assets. Propensity score analyses provide evidence confirming that adolescents with savings accounts are more likely to have savings accounts as young adults. There is some evidence to suggest that adolescents whose parents have savings on their behalf and higher net worth are more likely to have more saved as young adults. Findings suggest that parents may play an important role in modeling saving habits to adolescents. Furthermore, if our findings regarding adolescents’ savings accounts are confirmed in future research, this study suggests that having a savings account in adolescence may lead to an increased likelihood of having a savings account in young adulthood.
Friedline, T.* Elliott, W., and Nam, I.* (2011). Predicting savings in young adulthood: The role of adolescent savings. Journal of the Society for Social Work and Research, 2(1), 1-22.
A groundswell of interest in young people’s ability to understand and handle financial decisions has generated keen interest in financial knowledge and effectiveness of financial education. This study examines an innovative four-year school-based financial education and savings program, called “I Can Save” (ICS). Using a quasi-experimental design, the study examines quantitative and qualitative data to analyze program effects on financial knowledge. Elementary school children who participated in ICS scored significantly higher on a financial literacy test taken in fourth grade than comparison group students in the same school, regardless of parent education and income. Results suggest that young children increase financial capability when they have access to financial education and it is accompanied by participation in meaningful financial services.
Sherraden, Margaret. S., Johnson, L., Guo, B. and Elliott, W. (2010). Financial capability in children: Effects of participation in a school-based financial education and savings program. Journal of Family and Economic Issues, 32(3), 385-399.