Wealth Trajectories of Children from Immigrant and Native-Born Families: Hierarchical Linear Models of Net Worth Change from Young to Mid-Adulthood

Background and Purpose: Although the wealth disparities between immigrants and native-born populations are well documented and demonstrate how immigrants fare in the United States, little attention has been extended to examine the children of these two groups. Persistently lower ownership of financial assets (e.g., stocks and bonds) may put children of immigrants at a financial disadvantage compared to their counterparts of native-born parents, especially when facing important milestones like the decision to pursue higher education. This immigrant-native gap in financial asset ownership raises the question of whether offspring of immigrants achieve wealth parity compared to their peers from native-born families. A comparison of the wealth trajectory of children from immigrant families and native families can strengthen our understanding of the wealth gap between these two groups.

Methods: Using the National Longitudinal Survey of Youth 1997 (NLSY97), this study modeled wealth trajectories of children from immigrant and native-born families from their mid 20s to mid 30s, with a focus on the role parental financial assets play in shaping these trajectories (N = 5,060). Net worth in this study is a continuous variable calculated by subtracting total debt from total assets. Parental financial asset ownership is measured by parents’ use of asset products (Low level = no financial asset, Median level = only owned bank account, High level = owned sophisticated financial assets). Parents’ immigration status was measured by if the mother or father was native-born or foreign-born. This study also included a series of time-varying and time invariant covariates. Three hierarchical linear models in conjunction with a robust method analyzing zero-inflated and skewed outcomes were employed in the data analysis.

Results: Main model showed that children of immigrants started with a higher level of wealth (b = 0.14, p < .001) than children from native-born families. Parents’ high level of financial asset ownership had a positive association with adult children’s net worth at age 25 (b = 0.22, p < .001). Models with interaction terms showed that: (1) children of immigrants had higher level of initial wealth (b = 0.20, p < .001), however, the wealth growth rate declined over time (b = -0.05, p < .05); (2) high-level parental financial asset ownership was positively associated with wealth growth rate (b = 0.13, p < .001).

Conclusions and Implications: The findings reveal a “wealth growth gap” between children of immigrants and children of native-born parents: Although children of immigrants seem to outperform their peers with native-born parents from their young to mid-adulthood, their wealth declined over time. This decline may continue and lead to potential wealth disparities between these two groups in their later lives. More research is needed to examine the economic wellbeing of children of immigrants from a longitudinal perspective. This study also underscored the importance of practice and policy actions to facilitate asset building among immigrant parents.