Study shows Great Recession hit young people especially hard, limiting ability to save for future

Nov 08, 2013

Many households lost money, savings and net wealth during the Great Recession, but the effects didn't stop with households' balance sheets. The final effects of the recession are lingering for many young people as well. A professor at the University of Kansas has authored a study showing that young people who grew up in households that lost wealth during the economic downturn suffered ripple effects that prevented them from accumulating their own savings during young adulthood— a time of life characterized by transitioning to independence.

Terri Friedline, assistant professor of social welfare and associate director of the Assets and Education Initiative in the School of Social Welfare, co-authored the study along with Ilsung Nam, a postdoctoral fellow at the institute and Vernon Loke, assistant professor at the Eastern Washington University School of Social Work. The researchers analyzed data from the Panel Study of Income Dynamics, a large, nationally representative survey that allowed researchers to track economic information on American households from 1999 to 2009. The 10 year frame allowed them to view patterns of net worth accumulation and dispersion during the economic prosperity of the late '90s, during the recession of the early '00s and immediately during the Great Recession through 2009. The researchers were interested in mapping households' net worth patterns and exploring whether those patterns had effects on the young people who grew up in those households.

The article is forthcoming in the Journal of Family and Economic Issues.

The researchers found two distinct patterns of net worth among the households they studied. The patterns emerged after controlling for important factors like household income and head of households' race, gender, education level and marital status. The first group, 69 percent of households, retained high and stable net worth. The second group, 31 percent, suffered a stark decline in net worth, especially between 2007 and 2009.

The households that lost net worth between 1999 and 2009 were often vulnerable to begin with, Friedline said. Households headed by African-Americans had a median of about $16,000 in net worth at the beginning of the time frame and only $1,500 at the end. Those headed by women faired just as bad if not worse, averaging $11,000 to begin with and zero at the end. Education also played a role, as households headed by someone with a high school diploma or lower level of education averaged $43,000 in net worth at the beginning and $10,000 at the end of the 10-year frame.

The data showed that young people growing up in households that suffered financially also experienced financial difficulty of their own in . Not surprisingly, young people who grew up in households that retained their net worth experienced the greatest financial benefit.

Young people felt the pinch of their households' losses as evidenced in their average amounts of personal . Those who grew up in households that lost the most averaged about $300 in savings in 2009, while their counterparts in households that lost the least averaged about $3,000.

"In the grand scheme of finances, these are both relatively small amounts. But with the higher savings are coming from households that may be able to help support them financially if they have a two-week gap in employment," Friedline said. "You can't live very long on $300. We have to remember that young adults had some of the worst unemployment statistics during the recession compared to older age groups. Young adulthood is viewed as this time of transition. At this age, young adults are making some of their first entries into the labor market or changing jobs. They are enrolling in or graduating from college and making decisions about careers. They are seeking their own apartments or homes, applying for health insurance and maybe thinking about retirement investments. It's such an important time in life. But if they are struggling financially, it is unlikely that their $300 in savings can be stretched very far. And if their households are also struggling financially having lost significant amounts of wealth during the Great Recession, young adults may not have a very strong safety net to fall back on."

The findings illustrate the importance in helping young people save from an early age, especially those growing up in lower-income households or from otherwise disadvantaged backgrounds. During financial crises, households hit the hardest rely largely on public assistance programs such as welfare or the Supplemental Nutrition Assistance Program for support. Funds for such programs are limited, Friedline said, sometimes discouraging people from accumulating savings and wealth. Reports written by the New America Foundation, a think tank based in Washington, D.C., indicate that millions of households have benefited from SNAP in recent years. However, limits on the amounts of wealth SNAP-eligible households can hold, and a trend among some states to make the limits more restrictive undermine the utility of the important safety net for households that suffered the most during the recession. If policies like these were adapted or new policies developed to make saving easier, lower-income households and their young people may be more likely to have savings to rely on in times of financial duress.

Other research by Friedline and her colleagues at the Assets and Education Initiative has shown that when presented with savings accounts early in life, even at modest amounts, young people not only can and do save in the future, but are more likely to make other investments and have healthier financial portfolios than their peers without savings accounts. They have also published research showing that people who save from a young age are better-informed financial consumers and maintain healthy relationships with financial institutions as they grow older, providing evidence that it can be in banks' best interests to facilitate savings for young people even though their accounts might not be immediately profitable.

"The effects from the recession have trickled over to young people," Friedline said. "It's easy to look at the recession as being restricted to specific years, but for many and the young people who grew up in them, the effects of the recession will last for many years. We should adopt policies that support financially and encourage them to save so they can weather financial crises."

Explore further: Savings accounts for children linked with later financial success

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User comments : 18

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freethinking
1.3 / 5 (13) Nov 08, 2013
All you who voted for Democrats and Obama because they promised change, you need to thank them for keeping their promise. All you now have is change!

Democrats and Obama are responsible for reducing your standard of living, and now with Obamacare, your standard of living will drop even further. Soon you won't even have the change they promised.
ryggesogn2
1.6 / 5 (13) Nov 08, 2013
They get what they deserve with BHO and decades of socialist indoctrination.
ryggesogn2
1.3 / 5 (13) Nov 09, 2013
And some say this site is not biased. Surley they can find some articles about Obamacare.
And there is no mention in this piece about how the young will be forced by Obamacare to high medical insurance rates.
VendicarE
3 / 5 (4) Nov 10, 2013

"All you who voted for Democrats and Obama because they promised change, you need to thank them for keeping their promise." - FreeTard-o

It certainly isn't the change that FreeTard-o wanted.

He is still demanding economic policies that would push the U.S. into a decades long, Grand Economic Depression.

Sorry Tardieboy, but making all the mistakes that Bushie made is the last thing on Obama's list of things to do no, matter how much you TeaTardians demand them.

VendicarE
4 / 5 (4) Nov 10, 2013
"Surley they can find some articles about Obamacare." - RyggTard

When are you going to start to hold the Corporation, that created the websites, responsible for their failure TardieBoy?

Obama didn't write a single line of code did he?

As always you are a mindless Retard.

antialias_physorg
5 / 5 (1) Nov 10, 2013
"if they have a two-week gap in employment..."

I dare say that if you have a gap in employment it's usually for a bit longer than 2 weeks. 300 or 3000 dollars aren't going to make much difference if there's no unemplyment assistance system in place (I don't know: does the US have one?)
ryggesogn2
1.1 / 5 (11) Nov 10, 2013
The PhysOrg site is the news aggregate site with minimal editing of most articles.

The bias shows in the articles they decide to post.
Jimee
5 / 5 (2) Nov 10, 2013
Thank you free market nut jobs, I mean crazies.
freethinking
1 / 5 (11) Nov 10, 2013
VD, we are already in a decade long slump started 6 years ago when the democrats took control of the house and senate. I agree we should hold accountable the company that designed Obama's website. Too bad it's Michelle Obama's friend's company, so I doubt Obama will hold them accountable.
ryggesogn2
1 / 5 (10) Nov 10, 2013
Thank you free market nut jobs, I mean crazies.

What free market?
There has been NO free market since the creation of the Federal Reserve.
Shakescene21
2 / 5 (8) Nov 10, 2013
"300 or 3000 dollars aren't going to make much difference if there's no unemplyment assistance system in place (I don't know: does the US have one?)"

@antialias physorg-- Yes, the US has unemployment compensation. It's OK for six to 12 months of unemployment, although it's not up to German levels.
ryggesogn2
1 / 5 (10) Nov 10, 2013
BHO ordered the extension of unemployment 2 -3 times longer than the insurance was supposed to pay.
VendicarE
5 / 5 (1) Nov 10, 2013
"VD, we are already in a decade long slump started 6 years ago when the democrats took control" - FreeTardo

Sorry FreeTardo, the slump started as a result of the free market policies of Randite Deciiple George Bush and Alan Greenspan, who has repeatedly gone on record with his admission that free market ideology is flawed, and that market regulation is a necessary component of the marketplace.

You can listen to him interviewed here.

http://www.cbc.ca...losophy/
VendicarE
not rated yet Nov 10, 2013
"There has been NO free market since the creation of the Federal Reserve." - RyggTard

And there never will be one as long as you are prevented from purchasing the sexual services of children, legalize murder and all other manner of morally reprehensible conduct.

We won't allow you such freedoms, so you whine about there not being a free market.

You can't be for free markets and against child prostitution at the same time.

That is why the Free Market Libertarian Party panders to child prostitutes in it's platform, and that is why it is known as the Pedo Party.

NikkieTard (arrested for child molestation) is probably a card carrying member.

VendicarE
5 / 5 (1) Nov 10, 2013
"BHO ordered the extension of unemployment 2 -3 times longer than the insurance was supposed to pay." - RyggTard

Indeed. This is the primary reason why the deficit is so high.

Imagine the number of homeless and destitute in America as a result of the Republcan/Randite mismanagement of the economy, if he had not done so.

Your sick in the head Randite political ideology caused this Grand Recession - almost depression - and there is no way in hell that more of the same Randite poison is going to solve it.

VendicarE
not rated yet Nov 10, 2013
"The bias shows in the articles they decide to post." - RyggTard

Reality has a notoriously Liberal Bias.

RyggTard doesn't live in the reality based community. He exists in a Faux News/Drudge Report anti-parallel reality where war is peace, murder is life, hate is love, and Spock has a beard.
ryggesogn2
1 / 5 (6) Nov 11, 2013
"Sure, for adults under 26, Obamacare offers a key perk: They can stay on their parents' plans. But for anyone 26 or older — a category I've just joined — the options are grim:

You can forgo health insurance and fork over 1% of your income to Uncle Sam as a penalty.

You can choose catastrophic-only coverage (if you're under 30), and be left in the lurch for most medical expenses below a certain high deductible — likely around $6,400."
"n Arizona, the average monthly premium for a 27-year-old is expected to soar to $261.87 a month, up from $102. It's the same story in other states, including Georgia (where monthly premiums are increasing by $165), Illinois ($133), Michigan ($138) and Vermont ($216)"
http://www.usatod...3489751/
ryggesogn2
1 / 5 (6) Nov 11, 2013
"Food stamp enrollments have remained over 47 million for an unprecedented 12 consecutive months.

According to the most recent figures available from the United States Department of Agriculture (USDA), which oversees the food stamp program, in August 2012, 47,102,765 individuals were enrolled in the program, known officially as the Supplemental Nutrition Assistance Program (SNAP). Enrollments never fell below 47 million in subsequent months and as of August 2013 stood at 47,665,069, representing nearly one out of every seven people in America. "
http://www.breitb...ire-Year
Thanks to BHO's socialist state.