Panel Paper: Cohort Patterns of Liquid Assets and Consumer Debt Among Vulnerable Populations

Friday, November 7, 2014 : 2:10 PM
Cochiti (Convention Center)

*Names in bold indicate Presenter

J. Michael Collins, University of Wisconsin-Madison and Leah Gjertson, University of Wisconsin, Madison
Using data from the 1983–2010 waves of the Survey of Consumer Finances, the authors examine liquid wealth and consumer debt for households with a head born between 1929 and 1943 (aged 67–81 by 2010) and for those with a head born between 1944 and 1958 (aged 52–66 by 2010). This examination focuses on three specific markers of economic vulnerability: income level (above or below the twenty-fifth percentile), education level (high school or less, or more than high school), and race (White or non-White). By comparing the cohort born before World War II with the cohort born after the war, the authors are able to identify changes in accessible balance sheets among relatively vulnerable populations. The authors find increasing consumer debt, with younger cohorts borrowing more than the older cohorts, and decreasing liquid wealth relative to income or assets. Education and minority race are strong predictors of holding liquid assets. Housing remains a main driver of overall wealth, especially among families with low and moderate incomes. A significant portion of households in each age group have little liquid wealth, however. Responses to qualitative questions suggest that vulnerable households are less likely than wealthier households to be motivated to save by liquidity concerns, and the association persists across the age groups. We examine policy changes over the period and identify those with the potential to contribute to key trends. Such events include changes in bankruptcy, tax, and welfare laws as well as shifts in interest rates and employment. The decline in liquid savings—or emergency savings—may exacerbate vulnerable households’ financial stress. Policies that promote small-dollar, unrestricted savings, and reduce barriers to savings among populations in public programs may have particular merit.