Financial Capability As a Pathway to Financial Well-Being for Caregivers of Children

Background and Purpose: The average family could spend as much as 16% of their income on childcare for one child, with costs associated with childcare continuing to burden caregivers. Financial stress dominates the many stressors for caregivers of children because of rising childcare costs, and for low-income families who already experience challenging financial circumstances, they report more stress. Yet, enhanced financial well-being among caregivers of children can mitigate the stress that constrains them from being a viable care option for children. This study sought to examine how two financial capability components – financial literacy and financial inclusion shape the financial well-being of caregivers of children and clarify possible disparate outcomes among heterogenous caregiver subgroups.

Methods: Using data from the 2017 National Financial Well-Being Survey, an analytic subsample of participants (N=2,148) aged 18-74+ who cared for, and financially supported children was examined. OLS regression with cluster robust standard errors accounting for state-level clustering was used to examine the unique effects of financial literacy (comprising financial knowledge and financial skill) and financial inclusion (comprising ownership of checking/savings account or a retirement account) on caregivers’ financial well-being.

Results: Our results revealed that all financial capability variables contributed to caregiver financial well-being, with financial skill (β=.42, p<.01) being the most consistent and strongest predictor followed by retirement savings account (β=.09, p<.01) across all four caregiver subgroups and the full sample. Variation in the relationship between these financial capability factors and financial well-being was observed based on children’s age groups. Financial knowledge was significantly associated with financial well-being in three models – the full sample (b = 1.36, RSE = 0.39, p < .01), caregivers of children below 7 years (b = 1.98, RSE = 0.63, p < .01), and caregivers of children 13-17 years (b = 1.57, RSE = 0.78, p < .05). Financial inclusion, such as having a checking/savings account at a bank/credit union consistently predicted financial well-being in three models – in the full sample of caregivers (b=2.17, RSE = 0.77, p < .01), caregivers who added an additional child (b = 6.45, RSE = 2.49, p < .05), and caregivers of children below 7 years (b = 2.78, RSE = 1.36, p < .05).

Conclusions and Implications: As many low-income families increasingly assume (relative/non-relative) caregiving roles in a rapidly financialized world, there is urgent need for support programs that integrate both financial literacy and financial inclusion for enhancing caregivers’ financial well-being and child outcomes. Findings offer evidence of existing heterogeneity in the relationship between financial knowledge, checking or savings accounts, and retirement savings accounts with financial well-being, and highlight entry points for intervening with caregivers of children of different ages. While raising new questions about caregiver heterogeneity, findings are consistent with the notion of a holistic financial capability policy model that incorporates both financial inclusion and financial literacy for improving the financial well-being outcomes of families.