Bootstraps are for black kids: Race, wealth, and the impact of intergenerational transfers on adult outcomes

parents doing finances with kids in background

The racial wealth gap is perhaps the most striking signifier of inequality in America. Crucially, wealth disparities persist from generation to generation: Blacks are less likely to receive wealth transfers from parents than whites, and conversely, they’re under more pressure to transfer their own limited wealth to parents or relatives than whites.

However, it is worth investigating the kinds of parental financial support these groups receive. This article explores not only how parents support their children financially–be it for education, home purchase, or other reasons–but also how that relates to the children’s eventual economic achievement.

Key Findings

  • 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.