Asset Trajectories and Child Outcomes: Implications for Asset-Based Policies

Purpose: Wealth is increasingly recognized as an important determinant in children's human capital trajectories, and a number of countries have proposed or implemented asset-building policies targeting children. Much of the research on assets, however, focused on the predictors of asset holding, and little is known about asset accumulation trajectories. This is especially so for families with young children. In addition, while studies have demonstrated the positive effects of assets on children's outcomes, few have examined the effects of different asset accumulation patterns and trajectories. This paper attempts to clarify and specify the asset effects theory from a dynamic perspective. In particular, it explores and describes the different asset accumulation trajectories of families with young children; tests the effects of different asset trajectories on children's educational outcomes; and examines the mediated pathways for the asset effects across the trajectory classes.

Methods: Longitudinal data on 1036 children from 991 households, drawn from the National Longitudinal Survey of Youths 1979 Mother and Child datasets, was used in this study. The children were born in either 1986 or 1987, and were followed from around the time of their birth to the year 2006, when they were ages 19 to 20. To adjust for non-independence of observations for children belonging to the same household, the children were clustered by their mothers. This paper uses structural equation modeling techniques, including growth mixture models and path models, to explore the asset accumulation patterns of families with young children, and to examine the educational effects of the different asset accumulation trajectories.

Results and Implications: Using growth mixture modeling, four asset accumulation trajectory classes are identified, controlling for household income and other socio-demographic characteristics. The results indicate that around 78% of households belong to the Low Stable trajectory class that started with low initial net worth, and which experienced non-significant growth in assets over time, while only 4% of households with lower initial wealth levels experienced significant asset increases over the same period (Low Accumulator class). The reminding households belonged to trajectories where initial net-worth was significantly higher than 0, and where subsequent asset accumulation patterns were stable (12%) or increasing (6%) over time. Path model analyses further indicate that children from the Low Stable class have significantly poorer educational outcomes compared to children from the other asset trajectories. In addition, children from the Low Accumulator class have similar outcomes compared to children from households with higher initial net worth, regardless of subsequent growth trajectories. The effects of assets on children's educational outcomes appear to be fully mediated by the quality of home cognitive stimulation and the level of mothers' educational expectations for their children.

The data sheds light on the different asset accumulation trajectories of families with young children, including their antecedents and covariates. In addition, the results lend further support to the positive effects of assets on children's educational outcomes, and add to the knowledge base on possible mechanisms for the asset effect. Implications for social work practice and asset-building policies are discussed.