Even before COVID-19, one-third of US households with children were “net worth poor,” meaning they lacked enough financial resources to sustain their families for three months at a poverty level, new research shows.
In 2019, 57% of Black families and 50% of Latino families with children were poor in terms of net worth. By comparison, the rate for white families was 24%.
“These ‘net worth poor’ households have no assets to withstand a sudden economic loss, like we have seen with COVID-19,” says study coauthor Christina Gibson-Davis, professor of public policy and sociology at Duke University’s Center for Child and Family Policy. “Their savings are virtually nil, and they have no financial cushion to provide the basics for their children.”
The study is among the first to consider family poverty in terms of assets, not income. Using 1989-2019 data from the Survey of Consumer Finances, researchers analyzed net worth and income data from more than 19,000 US households with children under age 18.
“Reducing one kind of poverty isn’t helpful if another one is taking its place.”
Among households with children, net worth poverty has been steadily rising over the past 30 years, the authors found. In 2019, a two-parent, two-child household was deemed to be net-worth poor if they had less than $6,500 in assets—or less than one-fourth of the federal poverty line.
Families in that category—those with perilously low levels of net worth—outnumbered families who were poor based on income.
“Uncovering this aspect of poverty, which hinges on wealth, is game-changing,” says coauthor Lisa Gennetian, associate professor of early learning policy studies at the Sanford School of Public Policy.
“Most policies focus on income and families meeting their day-to-day needs,” Gennetian says. “These efforts are important. But our findings suggest that they are not helping families increase savings that help set children up for success.”
Notably, Black and Latino families were twice as likely to experience net worth poverty than to have poverty-level incomes.
“Reducing one kind of poverty isn’t helpful if another one is taking its place,” says coauthor Lisa Keister, professor of sociology. “Being net worth poor likely limits parents’ abilities to invest in their kids and shapes how they think about their kids’ future.”
“Even before the pandemic, many families with children were in a precarious situation,” Gibson-Davis says. “Things are not going to get better in the wake of COVID-19.”
The Russell Sage Foundation and the National Science Foundation supported the study, which appears in the Journal of Marriage and Family.
Source: Duke University