Asset Poverty and Debt Among Families with Children
Yumiko Aratani and Michelle Chau
Source: National Center for Children in Poverty
Increasingly the significance of asset ownership among low-income families is being recognized. Assets such as savings and homeownership are vital components of a family’s economic security, along with income and human and social capital. In this report, we use the term “assets” to refer to financial and economic resources, not including human capital. Unlike labor market earnings, income generated from assets provides a cushion for families in case of job loss, illness, death of a parent, or even natural disaster. This cushion may be especially important for the working poor, whose economic lives can be severely impacted by even short periods of unemployment. Asset ownership can also have long-term consequences for children. Research shows parental financial assets such as savings are positively associated with the cognitive development of school-age children. Homeownership is also known to have a positive effect on high school graduation. There are two major ways in which assets positively benefit children. First, housing assets can be seen as a proxy for the quality of residence. Homeownership provides residential stability, and the market value of homes often indicates the quality of school that children attend. Secondly, financial assets are potential resources for a family to invest in children. They can be used for sending children to preparatory schools or financing a college education. Thus, family assets can positively promote children’s well-being and educational achievements.