Childhood circumstances, such as parental divorce or growing up poor, have been shown to influence health and other outcomes later in life. But does a person's experiences in childhood also influence their future ability to provide financial support to their children?
According to a new study from a researcher from Penn State, parents who endured difficult childhoods provided less financial support to their children's education such as college tuition compared to parents who experienced few or no disadvantages. Regardless of current socioeconomic status, the parents who had more disadvantages in their childhoods gave their children $2,200 less, on average. Even though they still financially contributed to their children's education, the smaller amount suggests that intergenerational monetary exchanges could influence the next generation's success, according to the study author, Kent Cheng.
The findings were published in the Journal of Marriage and Family.
"Inequality can often start in the household through the exchange of resources within families," said Cheng, postdoctoral scholar in the Center for Healthy Aging at Penn State. "This work sheds light on how disadvantage is perpetuated across generations and intersects with broader societal divides, such as between those individuals with and without a bachelor's degree - a divide that increasingly shapes American life."
Previous studies have found that adverse experiences during childhood can have a negative influence on health and socioeconomic status during adulthood including cardiovascular health, mortality, labor market outcomes and educational attainment. However, Cheng said, most studies focus on the individual - how their early life experiences affect their life outcomes.
"We know that my childhood shapes my own life trajectory, but does it affect my descendants' life trajectories? That's the puzzle I was trying to uncover," Cheng said.
This study examines family-level outcomes. It is one of the first to evaluate the relationship between parents' childhood experiences and whether they provide large transfers of money later in life to their own children for education and other purposes and how much they provide. However, Cheng explained, the study does not analyze motivation or willingness to financially support the children's educational needs - rather, it focuses on if money transfers take place, what discrepancies may appear based on the parents' childhoods and if parents' current socioeconomic status matters.
Cheng used data from the Panel Study of Income Dynamics (PSID), a nationally representative sample and longest-running longitudinal household survey that began in 1968. It collects information from respondents and their descendants on employment, income, health, education and other topics.
Specifically, he used data from the Rosters and Transfers module of the PSID, which was conducted in 2013 and gathered information on intergenerational money transfers and is the latest available collection of such data. He merged this information with data from the Childhood Retrospective Circumstances Study on the same respondents. The Childhood Retrospective Circumstances Study is another PSID module, conducted in 2014, that collected data on the economic, psychosocial, environmental and health domains of early life such as parent/guardian relationship quality and history, neighborhood quality and safety, parent and family financial status, school experiences and health.
Cheng constructed a childhood disadvantage score, based on 13 factors. Respondents were then given a score based on the number of childhood disadvantages they experienced, from zero to four or more. He found that parents who experienced more disadvantages during their childhood were less likely to provide financial support to their children for educational purposes and those that do tend to give less money.
For instance, parents with four or more disadvantages gave an average of $2,200 less compared to those with no disadvantages, approximately $4,600 versus $6,800 respectively. When considered in light of the average cost of attending college in 2013, the year data was collected, parents with greater childhood disadvantages were able to shoulder roughly 23% of a year's cost of attending college for their children whereas parents with no childhood disadvantages were able to cover 34% of their child's annual college attendance costs.
What's more, the relationships remained even when controlling for parents' current socioeconomic status or wealth. In other words, parents who grew up in worse financial circumstances still gave less money for their children's education even if their socioeconomic status is now higher.
"This particular outcome shows that childhood really does leave an indelible mark on one's ability to provide money to their kids later in life, even if you eventually become successful in midlife," Cheng said.
With the cost of college education becoming increasingly expensive, Cheng said that understanding the factors that may keep people from pursuing higher education is critical, especially as American society is stratified not only by race but by educational attainment.
"If you have parents who are able to give you some money, so you don't have to take out loans for college, you're at an advantage," Cheng said. "We're seeing that the inequities are passed on to the next generation in the form of a parent not being able to give as much money to their children."
Funding from the National Institute on Aging supported this work.
