When families have assets, such as homes, cars, savings accounts or investments, getting through a financial crisis is much easier. Assets offer a form of insurance against unexpected events.
A new study from Oregon State University (OSU) found that more than 63 percent of American children and 55 percent of Americans live in “asset” poverty, meaning they have few or no assets to rely on in the event of a financial shock such as a job loss, natural disaster or medical crisis.
“Recessions, natural disasters, government shutdowns … these things happen,” said Dr. David Rothwell, an assistant professor in OSU’s College of Public Health and Human Sciences who studies poverty and its impact on families and children. “What we’re looking at is what tools families have to respond when these events take place. It’s almost like an insurance mindset.”
Research shows that asset poverty is higher than income poverty for children and families. In a 2018 study of Canadian families, researchers, including Rothwell, found that asset poverty was two to three times more common than income poverty. So even when families have adequate day-to-day funds, if they are asset-poor, they will likely struggle during a financial shock.
“This is a dimension of financial security that we don’t think about that much, and it’s pretty high. The findings highlight the extent of financial insecurity among American families. These shocks ripple through the family and down to the children,” said Rothwell.
Using data from the Luxembourg Wealth Survey, the researchers analyzed income and asset data from more than 250,000 households in the U.S., Australia, the United Kingdom, Finland, Italy and Norway.
The United States and Australia had the highest rates of child asset poverty, at 62.9 percent each, followed by the United Kingdom at 52.2 percent, Italy at 48.9 percent and Finland at 47.6 percent. Norway had the lowest rate, at 34.4 percent.
The findings show that in three of the six countries, more than half of all children live in asset poverty. In all the countries, children of single mothers are most at risk.
“There’s some variation between the countries, but all of them are high in asset poverty among children,” Rothwell said. “Children are in a vulnerable position.”
The study also shows that American children are more likely to live in asset poverty than similar children in other countries, even after controlling for other factors.
“In a global context, the fact of being born in the U.S. puts you at higher risk for asset poverty,” Rothwell said. “It’s especially difficult for families in the U.S. because the social safety net is so thin. Other countries have more robust health insurance systems, unemployment, housing and other social supports.”
“The prevalence of asset poverty suggests a need for innovative policies to offset short-term insecurity and promote long-term development,” Rothwell said. “The current policy demonstrations have potential to improve the life chances of children.”
Experiencing poverty in childhood can have lifetime impacts. Previous research has shown that kids who grow up in poverty are more likely to struggle in school, make less money throughout life and experience family instability as adults.
The study is published in the journal Children and Youth Services Review.
Source: Oregon State University