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Connections with banking institutions and diverse asset portfolios in young adulthood: Children as potential future investors

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  • Friedline, Terri
  • Elliott, William
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    Abstract

    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Children and Youth Services Review.

    Volume (Year): 35 (2013)
    Issue (Month): 6 ()
    Pages: 994-1006

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    Handle: RePEc:eee:cysrev:v:35:y:2013:i:6:p:994-1006

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    Web page: http://www.elsevier.com/locate/childyouth

    Related research

    Keywords: Children's savings; Savings accounts; Asset portfolios; Financial investments; Child Development Accounts; Panel Study of Income Dynamics;

    References

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    1. Jesse Bricker & Arthur B. Kennickell & Kevin B. Moore & John Sabelhaus, 2012. "Changes in U.S. family finances from 2007 to 2010: evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue June, pages 1-80.
    2. Brian K. Bucks & Arthur B. Kennickell & Kevin B. Moore, 2006. "Recent changes in U.S. family finances: evidence from the 2001 and 2004 Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Mar, pages A1-A38.
    3. Cliff Robb, 2011. "Financial Knowledge and Credit Card Behavior of College Students," Journal of Family and Economic Issues, Springer, vol. 32(4), pages 690-698, December.
    4. Cramer, Reid, 2010. "The big lift: Federal policy efforts to create Child Development Accounts," Children and Youth Services Review, Elsevier, vol. 32(11), pages 1538-1543, November.
    5. Friedline, Terri & Elliott, William & Chowa, Gina A.N., 2013. "Testing an asset-building approach for young people: Early access to savings predicts later savings," Economics of Education Review, Elsevier, vol. 33(C), pages 31-51.
    6. Jesse Bricker & Arthur B. Kennickell & Kevin B. Moore & John Sabelhaus, 2012. "Changes in U.S. family finances from 2007 to 2010: evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue June.
    7. Micahael Tomz & Gary King & Langche Zeng, . "ReLogit: Rare Events Logistic Regression," Journal of Statistical Software, American Statistical Association, vol. 8(i02).
    8. Webley, Paul & Nyhus, Ellen K., 2006. "Parents' influence on children's future orientation and saving," Journal of Economic Psychology, Elsevier, vol. 27(1), pages 140-164, February.
    9. Patrick Royston & Willi Sauerbrei, 2007. "Multivariable modeling with cubic regression splines: A principled approach," Stata Journal, StataCorp LP, vol. 7(1), pages 45-70, February.
    10. Elliott, William & Destin, Mesmin & Friedline, Terri, 2011. "Taking stock of ten years of research on the relationship between assets and children's educational outcomes: Implications for theory, policy and intervention," Children and Youth Services Review, Elsevier, vol. 33(11), pages 2312-2328.
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