Authors: Yunju Nam, Darrick Hamilton, William A. Darity, Jr., and Anne E. Price
Abstract: Accumulated wealth can be passed on to children, begetting yet more wealth and opportunity in successive generations. This report examines associations by race between parental economic resources, parental financial support, and their children’s adult economic success. To do so, we use data from the Panel Study of Income Dynamics (PSID) collected between 1982 and 2013. The sample consists of heads of households or spouses who were 35 to 46 years old in 2013 and who were children or step-children of household heads in the 1984 sample (889 whites and 508 blacks). We measure parental economic resources by considering both family income and net worth from 1982 to 1984 when children were dependent of household heads. We use three types of parental financial support using the new information in the 2013 Transfer data in PSID: parents’ financial support for higher education, for homeownership, and for all other purposes. These dichotomous variables of parental assistance indicate whether individuals in the sample have ever received financial assistances for each purpose since age 18. Our measures of children’s adult outcomes include educational attainment, family income, homeownership, and net worth.
Key Finding
- A greater proportion of white adult children receive financial support from their parents than blacks in all three categories of parental support. The share of whites receiving financial support from their parents is 34% for higher education, 12% for homeownership, and 26% for other purposes. The comparable figures for blacks are 14%, 2%, and 19%, respectively.
- Median parental income and net worth were much higher among those parents who provided financial support to their children than among those who did not.
- Black parents with more limited resources display a greater inclination to provide financial support for their children’s education than their white counterparts. Median parental wealth was a mere $3,699 among black parents who did not provide any financial support for their children’s higher education, but it was $73,878 among white parents who provided no support to their children. (For black and white parents who did provide support, median net worth was $24,887 and $167,935, respectively.)
- Racial differences in subsequent economic outcomes are much smaller among those who received some support from their parents for higher education than those who did not. The relationship between parental support for education and subsequent economic outcomes is strongest for educational attainment and homeownership.
- While parental financial support for “other purposes” is associated with mixed economic outcomes among blacks, it has a negative association for whites for all outcomes except educational attainment. These results may indicate that adult whites receiving financial support from their parents for reasons other than education and homeownership may have been given these transfers to meet urgent or emergency needs, not for investment or asset-building.
