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Savings of young parents

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  • Ricardo Cossa
  • Erin L. Krupka
  • Annamaria Lusardi

Abstract

In this paper, we examine household savings using data from the National Longitudinal Survey, Cohort 1997 (NLSY97). This data set provides detailed information about assets and liabilities of parents with teen-age children and allows researchers to examine patterns of accumulation at early stages of the life cycle. In our empirical work, we have first to deal with several problems in measuring wealth. While many respondents report owning assets and liabilities, they often do not report their values. This problem is severe, in particular among financial assets. It is also difficult to devise an appropriate measure of accumulation when examining young parents, since assets and liabilities display different degrees of liquidity. To get around the non-response problem, we impute the missing values for assets and liabilities. This allows us to calculate household wealth for the whole sample. We examine household wealth holdings by considering several measures of accumulation: total (non-pension) net worth, financial net worth, and retirement savings. We study their distribution across different demographic groups and show that many households, in particular those headed by young parents (younger than 35), minorities, and individuals with low educational attainment, display very little accumulation. Many have no financial assets and their total net worth is also low. Housing equity is the main asset in many household portfolios and often the only asset families own. Overall, there is much heterogeneity in wealth holdings not only across but also within demographic groups. This suggests that many factors are at play in shaping the wealth accumulation of parents with young children.

Suggested Citation

  • Ricardo Cossa & Erin L. Krupka & Annamaria Lusardi, 2000. "Savings of young parents," Working Paper Series WP-00-23, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-00-23
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    References listed on IDEAS

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    Cited by:

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    2. Annamaria Lusardi & Olivia S. Mitchell & Vilsa Curto, 2009. "Financial Literacy among the Young: Evidence and Implications for Consumer Policy," NBER Working Papers 15352, National Bureau of Economic Research, Inc.
    3. Steven J. Davis & Felix Kubler & Paul Willen, 2006. "Borrowing Costs and the Demand for Equity over the Life Cycle," The Review of Economics and Statistics, MIT Press, vol. 88(2), pages 348-362, May.
    4. Grinstein-Weiss, Michal & Hun Yeo, Yeong & Zhan, Min & Charles, Pajarita, 2008. "Asset holding and net worth among households with children: Differences by household type," Children and Youth Services Review, Elsevier, vol. 30(1), pages 62-78, January.
    5. Annamaria Lusardi, 2003. "The Impact of Financial Education on Savings and Asset," Working Papers wp061, University of Michigan, Michigan Retirement Research Center.
    6. Nicole Kapelle & Sergi Vidal, 2020. "Diversity in Family Life Course Patterns and Intra-Cohort Wealth Disparities in Late Working Age," SOEPpapers on Multidisciplinary Panel Data Research 1092, DIW Berlin, The German Socio-Economic Panel (SOEP).
    7. Leung, Charles, 2004. "Macroeconomics and housing: a review of the literature," Journal of Housing Economics, Elsevier, vol. 13(4), pages 249-267, December.
    8. Grinstein-Weiss, Michal & Wagner, Kristen & Ssewamala, Fred M., 2006. "Saving and asset accumulation among low-income families with children in IDAs," Children and Youth Services Review, Elsevier, vol. 28(2), pages 193-211, February.
    9. Nicole Kapelle & Sergi Vidal, 2022. "Heterogeneity in Family Life Course Patterns and Intra-Cohort Wealth Disparities in Late Working Age," European Journal of Population, Springer;European Association for Population Studies, vol. 38(1), pages 59-92, March.

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