Children’s Perceptions of Economic Hardship: Measurement, Mechanisms and Well-being

This paper adopts a child-centered perspective to study how children perceive their family’s economic situation. Using linked survey and administrative data for all children aged 8 to 12 living in Luxembourg, we compare children’s self-reported assessments of financial hardship with objective monetary indicators. While child-perceived and income-based financial situations are positively associated, there are substantial discrepancies. At a given level of monetary poverty, children living in single-parent households or in migrant families report higher levels of financial concern. Conditional on socio-demographic characteristics, monetary poverty and income insecurity explain little of the variation in perceived financial hardship. In contrast, the relative income position within schools and child-specific deprivation—particularly limitations in shared family activities—are strongly associated with higher level of financial worries. An analysis of discordance reveals an asymmetry. Overestimation of hardship among non-poor children is more likely for non-natives, those growing up in a lone family or who are poorer than their schoolmates, whereas underestimation among poor children shows weaker and less systematic correlates. These perception gaps matter: children who report perceived financial hardship display lower life satisfaction and worse self-rated health even when they are not monetarily poor, whereas poor children who do not report perceived hardship show well-being levels closer to those of non-poor peers. Overall, the findings indicate that children’s perceptions of economic hardship extend beyond their material living conditions and also reflects their social and emotional environment.