A Small Boost in Family Income Makes a Big Difference for Kids

A new study finds more cash can significantly improve long-term outcomes for poor children. Especially those with emotional or behavioral problems.

Shannon Stapleton / Reuters

While money might not be the single most critical ingredient in child rearing, the ability to provide basics such as food, shelter, healthcare, and education can make a significant difference in a child’s overall well being. And a new paper from the National Bureau of Economic Research finds that increased cash flow might be especially helpful when it comes to caring for children facing emotional or behavioral obstacles.

In 2011 7.5 percent of 6 to 11-year-olds were on prescription medication for emotional and behavioral problems such as ADHD, anxiety, and depression according to the paper. But that figure was 9.2 percent for children whose families fell below the poverty line

The study’s authors, Randall Akee of UCLA, Emilia Simeonova of Johns Hopkins, and E. Jane Costello and William Copeland of Duke, suggest that children’s well being may improve along with household income. In order to investigate the impact of an increase in household income—while omitting the positive impact that a change in career or education among parents might play—the study took a look at unearned income. Researchers looked at Native American families who started receiving an average annual payment of $4,000 per adult tribe member after a casino opened on tribal land. Prior to the casino opening, the average income of these households was $22,145. As a control group, they also included non Native American families who didn’t benefit from the new casino. They interviewed parents and children annually, from around the age of 9 until kids were 16 years old. They then followed up with the kids periodically to see how they were doing in adulthood.

They found that after casino payments started arriving, children who had displayed emotional or behavioral problems started showing significant improvements. Both conscientiousness and  agreeableness increased significantly, as measured by their responses to questionnaires and personality assessments. The less favorable trait of neuroticism, (which they describe as a chronic level of emotional instability that can lead  to psychological distress) also saw a slight uptick, but it wasn’t statistically significant.

These shifts may take place in part because of the positive effect that more money can have on parents. Increased household income can decrease individual and marital stress, lower reported drug and alcohol usage, and increase parental supervision and involvement.

That last point may be a key to understanding why an increase in household income can boost the overall health of kids. The financial health of a household impacts children in many ways. There are obvious ones, like the ability to put food on the table and to provide safe, clean housing. But household earnings also play a role in how parents invest in their children. Parents with more income can often afford to give their children better educational opportunities, they can pay for extracurricular activities, they can move to better neighborhoods, and they can spend more quality time with their kids. For example, additional income sometimes means that a parent can reduce work hours in order to care for children. Hourly workers can take on fewer shifts, or be more selective about employment, choosing schedules that coincide with school hours, so that they can spend time with children after school. These investments are especially important for children who were already struggling with emotional or behavioral problems. In the study, families who received casino cash reported better parent-child relationships, and that was especially the case in households where children had struggled with emotional and behavioral problems in the past.

When researchers followed up with these children at age 25, they found that those who had benefited from the boost in household income as children went further in school. And they were more likely to hold down a full-time job. While the findings aren’t revolutionary, they do show that even a small, consistent boost in household income can have important and long-term effects on children, allowing them to increase their chances for upward mobility, and a better life.