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Member Research & Reports

Member Research & Reports

Maryland Study Finds Bank Account Ownership during Childhood is Low among Minority Groups

A new study led by Dr. Jinhee Kim, associate professor in the department of family science at the University of Maryland School of Public Health, found that bank account ownership in children between the ages of 12 and 18 varies dramatically when examined by race and ethnicity. After conducting interviews and analyzing factors related to financial socialization, wealth and education, the researchers found that 74 percent of White children owned a bank account, compared with 38 percent of Blacks and 37 percent of Latinos.

Dr. Kim’s research focuses on the intersection of financial socialization, wealth, race, and ethnicity. In the study, titled “Differences in Bank Account Ownership Among White, Black, and Latino Children and Young Adults,” she defines financial socialization as the process by which individuals develop and acquire the skills and knowledge that will enable them to achieve financial independence later in life. Children often learn financial behaviors implicitly from their parents or explicitly through direct teaching. The study found there is a significant gap in bank account ownership between Black, Latino, and White individuals.

“There is limited information about the racial gap in bank account ownership among children and young adults,” Dr. Kim said. “Moreover, little is known about the effects of family financial socialization and socioeconomic factors that may contribute to this gap.”

This study is part of the Panel Study of Income Dynamics (PSID) and Child Development Supplement and Transition Into Adulthood — an ongoing longitudinal study that has been gathering socioeconomic and demographic data from individuals since 1968. Researchers focused on data through personal interviews with young adults who are 18 to 27 years old, all of whom were monitored from childhood into young adulthood.

Researchers measured variables such as “parental warmth” by asking parents if they give allowances to their children and talk to their children about the importance of donating money to charitable causes. They also measured the amount of time parents spent communicating with their children or partaking in their favorite activities. The results showed that White parents reported that they showed more warmth to their child, compared to Blacks and Latinos. Black parents were more likely to speak to their children about charitable giving, and were more likely to give allowance to their children. Among Latinos, parental warmth and the parents’ education levels were significant factors that influenced financial practices and bank account ownership.

The study also showed that children whose parents had more education were more likely to have a bank account. Among Black children whose parents had completed high school, the likelihood of bank account ownership during their childhood increased by 70 percent. For Black children whose parents held at least a college degree, the odds increased by 125 percent, compared to children whose parents did not complete high school.

“Practitioners such as financial educators and counselors need to work with parents and families about the importance of teaching financial responsibility to children,” Dr. Kim said. “It is important to work with financial institutions to provide an access to financial services for minority children and young adults whose families may not may not be available from their families.”

Overall, the study found that general disparities in household disparities between racial and ethnic groups were barriers to bank account ownership in minorities. Parents of racial and ethnic minorities have lower levels of bank account ownership themselves, and may not be able to provide the opportunities and skills to promote healthy financial habits in their children.

“Differences in Bank Account Ownership Among White, Black, and Latino Children and Young Adults” is published in the Journal of Financial Planning and Counseling.