Center on Assets, Education, and Inclusion

This study, generously funded by the FINRA Investor Education Foundation, examined the financial health and capability of Millennial young adults between the ages of 18 and 34 (N = 6,865) from the 2012 National Financial Capability Study (NFCS). In particular, this study explored how varying combinations of financial education and financial inclusion related to Millennials' financial behaviors, like saving for emergencies, using alternative financial service providers, and carrying debt. The 2012 NFCS is one of the few data sets with extensive questions about financial behaviors. The results identifying significant differences in the data were based on multiply imputed and propensity score weighted (average treatment effect for the treated; ATT) regression analyses of young adults in the sample.

The effects of different types of debt can vary widely: some debt is considered productive by advancing young adult households' financial health while other debt can be unproductive, pushing their financial health out of reach. A savings account may help young adult households reduce their reliance on unproductive debt and increase their access to productive debt that can facilitate wealth building and economic mobility. This study tests the association between a savings account and debt in the lives American young adults during periods of macroeconomic stability and decline. Owning a savings account in 1996 is associated with a 14% decrease ($844) in young adult households’ accumulated unsecured debt, while closing an account in 2008 is associated with a 12% increase ($1,320) in this type of debt. Overall, a savings account may help young adults “invest in their debt” by entering better, healthier credit markets and protecting them from riskier ones—especially during bad economic times. Policy interventions are needed that increase access to savings accounts and help young adult households to use debt productively.

State 529 plans are tax-preferred vehicles for post-secondary education saving, administered by states, usually through contractual agreements with private financial institutions. In large part, 529s have served to intensify the distributional advantages that already accrue to more economically-privileged households. However, a small, but growing number of states are attempting to transform their 529 programs into Children’s Savings Accounts (CSAs) programs so that they better serve children and families disadvantaged economically and educationally. However, there has been little discussion about what might differentiate a CSA program administered through a 529 from a standard state 529 program. Using the case of Promise Indiana’s 529-based CSA as an example, this paper outlines what we believe to be some of the critical elements of Children’s Savings Accounts and the ways that they may help to change the distributional consequences of our current educational and economic systems, such that they facilitate, rather than frustrate, the aspirations of disadvantaged children. The paper traces the origins and evolutions of Promise Indiana, within a discussion of components of 529-based CSAs, identifies design features that align with Identity-Based Motivation, outlines the rationale for a wealth transfer within CSAs, and shares lessons for replication. The Promise Indiana’s model may be relevant in other parts of the country, particularly as communities consider how to address imperatives related to educational attainment gaps and rising student indebtedness, as well as their implications for upward mobility and broader prosperity.

Building on evidence of increasing inequality with the 2008–2009 recession, we asked whether households experienced different financial trajectories through the recession depending on initial income and net worth. Using growth curve models of households headed by young adults in the Panel Study of Income Dynamics, we compared the relationship between initial income and net worth and the rate of change of income and net worth from 1989 to 2011 among households with income above and below $50,000. We found different patterns of income change and different relationships among income, net worth, and their rates of change between high- and low-income categories. Results suggest initial wealth helped to stabilize income and wealth changes among higher income households, reducing financial insecurity.

Student loan balances climbed to $1.2 trillion at the end of 2014, and delinquencies are rising even as they fall for most other types of debt. In fact, students with the smallest balances are most likely to default. Judy Woodruff learns more from Megan McClean of the National Association of Student Financial Aid Administrators and William Elliott of the University of Kansas.

The current young adult generation is expected to lead a resurgence in entrepreneurial activities in the United States and these activities are expected to drive economic growth in the coming years. However, young adults may find it difficult to fulfill the expectations of becoming entrepreneurs and drivers of economic growth. This is because entrepreneurial opportunities are typically reserved for the wealthiest and most privileged Americans who have the financial resources needed to invest in starting small businesses, such as savings and access to credit. In contrast, young adults have not had much time to save money, build credit, or accumulate wealth. Moreover, given historic wealth inequalities rooted in racism and discrimination, young adults from racial and ethnic minority groups may be left out of the entrepreneurial resurgence and its economic benefits. This study analyzes nationally representative, longitudinal data to addresses the questions of whether young adults' wealth can support their entrepreneurial activities by becoming self-employed and whether black and Latino/a young adults leverage their wealth differently to support their entrepreneurial activities. Generally, the probability of being selfemployed;increases for all young adults as they accumulate wealth. However, wealth may play an outsized role in the self-employment of black and Latino/a young adults. Black and Latino/a young adults may not be able to rely on taking out a small loan at a bank or credit union in order to open their business; instead, they may be forced to use their own limited wealth for pursuing entrepreneurship. Policies are needed that support wealth accumulation (particularly for racial and ethnic minorities), remove discriminatory lending practices, and provide young entrepreneurs with access to credit.

This study explored relationships among young adults’ wealth and entrepreneurial activities with emphasis on how these relationships differ among racial and ethnic groups. Using data (N = 8,984) from the 1997 National Longitudinal Survey of Youth, results indicate that being Black or Latino/a, as well as liquid asset holdings and net worth, were significantly related to the likelihood of self-employment. In analyses disaggregated by race or ethnicity, greater liquid asset holdings were associated with the decreased likelihood of self-employment among white young adults. Black young adults’ greater debt and net worth were associated with increased likelihoods of entrepreneurial activity. Among Latino/a young adults, greater liquid asset holdings and net worth were associated with increased likelihoods of self-employment. Wealth may play an outsized role in the self-employment of black and Latino/a young adults compared to that of their white counterparts. Racial and ethnic minority young adults may have a heavier burden for generating their own capital to embark on entrepreneurial activities when mainstream credit markets are unresponsive or inaccessible. Policy implications are discussed.