Longitudinal Study of Childhood Placements and Long-Term Net Worth

Background/Purpose: Net worth, or asset accumulation, is an essential part of living a financially stable life.  Without assets, individuals are more likely to live paycheck to paycheck, less likely to be prepared for financial hardships, and unlikely to be capable of retiring without entering into poverty.  There has been little to no research on the potential asset inequality among individuals who have had placements outside of biological homes.  Previous research on long-term outcomes of foster care experience have found higher rates of unemployment and underemployment, homelessness, poverty, and lower levels of education.   These factors indicate that individuals with a foster care history may also experience decreased net worth. This study addressed the following question:  Is there a correlation between an adult’s net worth and the status of their childhood placement?  

Methods: Data and samples: This study used data from the National Longitudinal Survey of Youth 1979 cohort, using data from the 1979, 1988, 2006, and 2008 interviews. The sample size consists of 6,040 individuals.

Measures: Multivariate linear analyses measured the association of net worth and a log transformation of net worth with childhood placement. Childhood placements included: living with a biological parent from birth to age 18, having ever lived with foster parents, having ever lived with kin other than biological parents, and having ever lived with adoptive parents.  Additionally, the study controlled for other factors associated with net worth including: net income, years of education, marital status, sex, employment status, parental status, and race.

 Results:The average net worth of participants who experienced placements outside of a biological home in 2008 when participants were 40-50 years of age was $199,391.60 while the average net worth of those who did not was $280,258.70. Analysis of a logged net worth indicated that living with a biological parent from birth to age 18 was associated with a 32% increase in long-term net worth when controlling for other covariates compared to those who experienced some other placement. Results of sub-analyses indicated that having experienced foster care, kin placement, or adoptive placements did not significantly affect long-term net worth when controlling for other covariates.

Conclusions and Implications: The results of this studybegin to increase our knowledge of the long-term effects of childhood placements outside of biological homes.  Policies and programs should increase attention to increasing the net worth of individuals who have experienced placements outside of biological homes. Interventions could act as a replacement of asset-transfers and other asset benefits associated with living with a biological parent throughout childhood.  Despite these implications, much more research is needed in the future to better understand the association between childhood placement and net worth.