Asset Accumulation Trajectories Among Families with Young Children: Predictors and Patterns of Growth

Background and Purpose: Wealth is increasingly a topic of interest to the public, policy makers and researchers, especially with the recent availability of longitudinal wealth data in national representative surveys. Much of the research on wealth, 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. The majority of the studies also make the assumption that the entire sample under investigation shares a single growth trajectory. However, it is reasonable to believe that this is not the case, and that there is more than one growth trajectory for wealth. Using longitudinal data from the National Longitudinal Survey of Youths 1979 Mother and Child datasets from 1987 to 2000, this paper explores and describes the different asset accumulation trajectories of families with young children. It tracks young families with children born in 1986 or 1987 over 13 years, from 1987 when the mothers are between the ages of 23 to 30, to year 2000 when they are between the ages of 36 to 43.

Methods: Longitudinal data on 991 households drawn from the National Longitudinal Survey of Youths 1979 Mother and Child datasets was used in this study. This paper uses growth mixture models to explore the asset accumulation patterns of families with young children, as well as identify the determinants of membership in the various asset accumulation trajectories. To adjust for non-independence of observations for children belonging to the same household, the children were clustered by their mothers.

Results: Examining the net worth of households using growth mixture modeling techniques, four distinct asset accumulation trajectories are identified. The vast majority of households (78%) belong to the trajectory class that started with low initial net worth, and which experienced non-significant growth in assets over time (LS). Another 4% of households have a slightly higher initial level of assets, but has a significant growth pattern over time (LA). About 12% of households belong to the third asset trajectory class where members have initial levels of assets that are significantly higher than zero, but with non-significant asset growth trends over time (HS). The remaining 6% of households have significantly higher initial level of assets and with significant growth trends over time (HA). Among factors that predict asset accumulation trajectory class membership include the age of mothers at time of child birth (e.g. older mothers have 1.5 times odds of belonging to HA or HS classes than the LS class), and race, with non-Black/non-Hispanic mothers having 12.5 times the odds of belonging to the HA class compared to their African-American counterparts.

Conclusions and implications: There is much heterogeneity in the asset accumulation experience, with 4 trajectory classes identified in this study. Consistent with prior research, the results indicate various socio-economic and demographic characteristics to be associated with the rate of wealth accumulation within families. Predictors of membership in the various asset accumulation trajectory classes are presented, and the implications for practice, research and policies promoting asset accumulation are discussed.