When we hear about “poverty” in the news, it’s usually measured by income. These measures are very useful! But, we also know that poverty isn’t just about how much money you’re making, it’s also about your net worth: the value of your assets minus your debts. If people suddenly lose income, having savings or selling belongings can cushion families and cover basic expenses such as food and housing. Additionally, some assistance programs, like the Supplemental Nutrition Assistance Program (SNAP), have asset tests that kick people with “too many assets” off benefits.
This puts many poor Americans in a double bind: they need assets as an economic safety net but are penalized for accumulating too many. Despite the importance of assets to the lives of poor Americans, according to Christina Gibson-Davis and her colleagues, there is not enough research on net worth poverty.
In their new study, Gibson-Davis and colleagues address our lack of knowledge about net worth poverty, which they define as a net worth less than one fourth of the federal poverty line, by examining how it affects children’s development compared to income poverty. To do so, they analyze survey data from 2002 through 2019. This survey include information on household wealth and income, as well as children’s cognitive and behavioral development.The researchers found that, for kids ages 3-17, net worth poverty was associated with worse reading scores, math scores, and behavioral outcomes, such as sadness and aggression. Although the effects of net worth poverty were similar to those of income poverty, kids who experienced poverty in both net worth and income had the worst outcomes.
Importantly, this research shows that having fewer assets had a greater negative influence on children’s outcomes than having more debt, although both could contribute to net worth poverty. Debt poverty alone was associated with worse behavioral outcomes while asset poverty was associated with worse cognitive and behavioral measures. The authors suggest that this is because asset-poor households have fewer resources on hand to invest in their kids than debt-poor households.
In short, this study suggests that children who are “doubly poor,” lacking in both income and net worth, are at the highest risk for cognitive and behavioral concerns. Policy makers should consider that interventions that target income-poor children alone may overlook the needs of those who are net worth poor.