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Toward Healthy Balance Sheets: Are Savings Accounts a Gateway to Young Adults’ Asset Diversification and Accumulation?

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  • Terri Friedline
  • Robert Hughes
  • Paul Johnson

Abstract

Understanding the balance sheets of today?s young adults?particularly the factors that set them on a path to financial security through asset diversification and accumulation?lends some insight into the balance sheets they will have when they are older. This study uses panel data from the Census Bureau?s 1996 Survey of Income and Program Participation to investigate the acquisition of a savings account as a gateway to asset diversification and accumulation for young adults. Two avenues were considered: The first emphasized ownership of a diverse portfolio of financial products, and the second emphasized the accumulated value of liquid assets. Almost half of the surveyed young adults owned a savings account (43 percent) and approximately 3 percent acquired a savings account over the course of the panel. (Older, nonwhite, or unemployed participants were significantly less likely to acquire an account.) Those who owned or acquired a savings account also had more diverse asset portfolios. Evidence suggests that young adults who acquire a savings account and diversify their asset portfolios may also accumulate more liquid assets over time, which can be leveraged in the future to strengthen their balance sheets.

Suggested Citation

  • Terri Friedline & Robert Hughes & Paul Johnson, 2014. "Toward Healthy Balance Sheets: Are Savings Accounts a Gateway to Young Adults’ Asset Diversification and Accumulation?," Review, Federal Reserve Bank of St. Louis, vol. 96(4), pages 359-389.
    • Handle: RePEc:fip:fedlrv:00032
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    References listed on IDEAS

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    Cited by:

    1. Sherrie L. W. Rhine & Wenhua Di & William H. Greene & Emily Perlmeter, 2016. "Savings Account Ownership During the Great Recession," Journal of Family and Economic Issues, Springer, vol. 37(3), pages 333-348, September.
    2. Sinha, Gaurav & Tan, Kevin & Zhan, Min, 2018. "Patterns of financial attributes and behaviors of emerging adults in the United States," Children and Youth Services Review, Elsevier, vol. 93(C), pages 178-185.
    3. Haotian Zheng & Elizabeth Harris & William Elliott & Megan O’Brien, 2023. "The Role of Children’s Savings Accounts in Promoting Savings for College Among Welfare Recipients: The Case of Harold Alfond College Challenge (HACC)," Journal of Family and Economic Issues, Springer, vol. 44(2), pages 285-296, June.
    4. Agyekum, Francis & Locke, Stuart & Hewa-Wellalage, Nirosha, 2016. "Financial Inclusion and Digital Financial Services: Empirical evidence from Ghana," MPRA Paper 82885, University Library of Munich, Germany, revised 15 May 2017.
    5. Mathieu R. Despard & Terri Friedline & Stacia Martin-West, 2020. "Why Do Households Lack Emergency Savings? The Role of Financial Capability," Journal of Family and Economic Issues, Springer, vol. 41(3), pages 542-557, September.
    6. Terri Friedline, 2015. "A Developmental Perspective on Children's Economic Agency," Journal of Consumer Affairs, Wiley Blackwell, vol. 49(1), pages 39-68, March.
    7. Terri Friedline & Stacia West, 2016. "Financial Education is not Enough: Millennials May Need Financial Capability to Demonstrate Healthier Financial Behaviors," Journal of Family and Economic Issues, Springer, vol. 37(4), pages 649-671, December.
    8. J. Birkenmaier & Q. Fu, 2019. "Does U.S. Household Financial Access Mediate the Relationship Between a Large Income Drop and Credit Record?," Journal of Consumer Policy, Springer, vol. 42(2), pages 267-283, June.

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    More about this item

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D3 - Microeconomics - - Distribution

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