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Savings of young parents

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Author Info
Annamaria Lusardi
Ricardo Cossa
Erin L. Krupka
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.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-00-23.

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Date of creation: 2000
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Handle: RePEc:fip:fedhwp:wp-00-23

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Keywords: Wealth ; Saving and investment;

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  19. B. Douglas Bernheim & John Karl Scholz, 1993. "Private Saving and Public Policy," NBER Chapters, in: Tax Policy and the Economy, Volume 7, pages 73-110 National Bureau of Economic Research, Inc. [Downloadable!]
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  20. Engelhardt, Gary V, 1996. "Consumption, Down Payments, and Liquidity Constraints," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 28(2), pages 255-71, May. [Downloadable!] (restricted)
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  23. Lupton, J. & Smith, J.P., 1999. "Marriage, Assets, and Savings," Papers 99-12, RAND - Labor and Population Program.
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