ASSETS, INEQUALITY, AND THE TRANSITION TO ADULTHOOD An Analysis of the Panel Study of Income Dynamics

Measures of socioeconomic status, like total household income, are strong predictors of a host of economic, educational, and health outcomes for individuals. Another perspective, though, asserts that household wealth and net worth can be an even more important avenue than income in improving outcomes for families and children and reducing societal inequality. Savings accounts for children have been proposed by policy advocates as a means for helping families to accumulate sav- ings to improve the lifetime chances for their children as they transition out of childhood and into their adult lives. In support of this hypothesis, a growing body of literature suggests a significant relationship between a household's level of wealth or assets and positive short-term developmental outcomes for children, such as better grades and classroom behaviors, regardless of their family's income level. The current study uses the Panel Study of Income Dynamics to test the relationship be- tween wealth in childhood and longer-term outcomes, indicating a positive transition into adult- hood. It finds that young adults who were raised in homes with more wealth at a point in their early childhood are more likely to have positive outcomes, such as graduating from high school, enrolling in college, and establishing their own independent checking and savings accounts. Although most of the observed benefits of wealth occur across socioeconomic groups, young people from lower- income families show the most consistent effects, and early household wealth appears to act as a buffer against negative outcomes, such as dropping out of high school.