Predicting Savings for White and Black Young Adults: An Early Look at Racial Disparities in Savings and the Potential Role of Children’s Development Accounts (CDAs)

This paper explores predictors of young adults’ savings using propensity score analysis and logistic regression with separate,
longitudinal samples of whites and blacks aged 17–23 from the Panel Study of Income Dynamics. We ask who saves among adolescents
and young adults and whether the likelihood of having a savings account and the amount saved in young adulthood can be predicted
by two factors: (1) having a savings account during adolescence and (2) having families who own assets. The majority of white
(90%) and black (64%) young adults had savings; however, blacks saved about 3% the amount saved by whites, suggesting that
young adults’ savings may be patterned after disparities in the distribution of assets and families may transfer a financial
advantage to young adults. Logistic regression results find that among whites, future orientation was a significant predictor
of having a savings account in young adulthood. A notable trend level finding was that white young adults were more likely
to have a savings account when they had a savings account as adolescents. Among blacks, academic achievement and household
size were significant predictors of having a savings account in young adulthood. If confirmed in future research, findings
suggest that Children’s Development Accounts may be one way to reduce racial disparities in savings by intervening at a young
age and providing universal accounts to improve savings across the life course.