Impact of family income in early life on the financial independence of young adults: Evidence from a matched panel data

Abstract

This study investigates whether the family income level in early life influences the financial independence of young adults. Using a large nationally representative U.S. sample (constructed based on the data from the 1999 to 2015 Panel Study of Income Dynamics, its 2009 to 2015 Transition to Adulthood Supplement and its 1997 to 2007 Child Development Supplement), we find that the relationship between one's family income level during adolescence and the financial independence of young adults follows an inverted U‐shape. We find that the college graduation status plays an important role in determining the financial independence of young adults. Once young adults graduate from the college, their financial independence is no longer influenced by their family income level during adolescence. The results show similar patterns after controlling for cognitive and noncognitive abilities and financial behaviours of young adults when they were children or teenagers. The findings of this study have significant implications for policymakers and educators.

Financial Independence and Academic Achievement: Are There Key Factors of Transition to Adulthood for Young Higher Education Students in Colombia?

“…The author reported that when parental economic support increased, a student’s grade point average decreases ( b = −2.233, p < 0.001), especially women and older students from Hispanic nations who significantly showed lower grade point averages than their counterparts. This is contrary to the findings by Dahl and Lochner (2012) and Cui et al (2019) that state that young adults from rich families have a better academic performance. On the other hand, Roksa and Kinsley (2019) reported that there was no significant association between family financial support and grade point average in a sample of low-income college students in the U.S.…”

“…When the family subsidizes the university studies, the student has the option of studying in his/her place of origin or going to another place. Family support is an important factor that can provide socioemotional support and economic support in college (Cheng et al, 2012;Cui et al, 2019); however, this postpones the financial independence of the emerging adult. Cheng et al (2012) reported that college students' cumulative GPA scores were not predicted by the perceptions of family economic support; however, the interaction of family economic support and family support is a significant predictor of students' grade point average.…”

Policy‐related implementational fluidity in subsistence marketplaces

“…For instance, community‐driven agricultural practices can also lessen the burden on individual families and foster innovative supply chain strategies (Blättel‐Mink, Boddenberg, Gunkel, Schmitz, & Vaessen, 2017; Upadhyaya & Rosa, 2019). Family focused financial literacy programmes also provide a strong foundation for effective management of business operations (Marchant & Harrison, 2020) and provide a strong financial foundation for the next generation (Cui, Xiao, Yi, Porto, & Cai, 2019). Focusing on family focused programmes and policies in subsistence contexts will help address implementational fluidity by providing necessary information and capital for people to enter the market work, increasing hope for a better future (Trujillo & Rosa, 2017), increasing SCMs’ access to essential technology and social resources, and ensuring that the needs of the entire family are addressed.…”

Financial Autonomy Among Emerging Adults in Australia

“…Other approaches measure financial independence by comparing own earnings against living expenses (Lee and Mortimer, 2009) or financial transfers received from parents (Manzoni, 2016). Cui et al (2019) and Kendig, Mattingly, and Bianchi (2014) measure financial independence as the extent to which an individual is responsible for earning a living, paying bills, rent, mortgages, and managing finances. Bea and Yi (2019) combine these measures of financial responsibility with information on familial financial support, to characterise young adult trajectories towards financial independence.…”