For kids’ future, money does matter

(AP Photo/Sue Ogrocki)

Money may not be able to buy happiness, but a new working paper suggests that it can have significant effects on children’s mental health and personality traits—particularly for our country’s most vulnerable kids.

The study—by Randall Akee of UCLA, Emilia Simeonova of Johns Hopkins University, and Jane Costello and William Copeland of Duke University—looks at a group of child and adolescent members of the Eastern Band of Cherokee Indians using data from the Great Smoky Mountains Study of Youth. Four years into the study, a casino opened on the reservation, and the Eastern Cherokee tribal government distributed a share of the profits—about $4,000—to each adult member of the tribe annually. These families, who averaged an annual income of $22,145 before the casino opening, saw a whopping 20 percent boost in their earnings.

This income increase provided researchers with an unusual glimpse into the ways in which money can directly affect children’s outcomes—especially those already suffering from behavioral problems and poor mental health.

Researchers have established that developing certain personality traits and cognitive skills at a young age go a long way in affecting one’s future health and well-being. And poor children are much more likely to suffer from mental and physical health problems that can limit their ability to learn and navigate the world as they grow older. But many of these past studies focus on early-childhood interventions, in large part due to the fact that cognitive skills—such as memory, reasoning, perception, and intuition—are only malleable at a very early age. This begs the question: What kinds of policies might help older disadvantaged children and teenagers?

Akee and his team point out that the kinds of mental health and personality traits that are associated with positive life outcomes—such as better physical health, educational attainment, and lifetime earnings—are still flexible at this time in a child’s life. And, while other studies have looked at how participation in education or social programs affects such traits, research has yet to establish a direct connection between extra unearned cash (unrelated to a parent’s job) and a child’s behavioral health.

The authors compared adolescents who resided in households that received the extra income by age 16 to those who received it later, or not at all. And the effects were dramatic: The extra income significantly lowered behavioral and emotional disorder among the studied children and adolescents. There were also large improvements in two personality traits that social scientists have linked to long-term positive life outcomes: Conscientiousness was boosted by 42.8 percent of a standard deviation, and agreeableness by 30.6 percent.

It is not completely clear how the money brought about these changes in such a profound way, although Akee and his co-authors have some ideas. Their work found a marked change in the parents’ mental health, as well as their relationship with the child and spouse. All of these changes have strong effects on children’s well-being. Households living outside the reservation were also more likely to move to higher-income areas. Research has established that one’s neighborhood has a direct effect on childhood outcomes. The authors found that, among the small subpopulation that did move, part of the improved mental well-being was due to the better neighborhood.

This study by Akee and his team is especially important considering that one in five children in the United States now live below the federal poverty line—defined as $23,550 for a family of four in 2013. While the United States does provide government assistance to children through programs like Temporary Assistance for Needy Families, food stamps, and the Earned Income Tax Credit, these programs are tied to the work effort of the parents and can be difficult to access, sometimes imposing undue hardship on the working poor. There are some international conditional cash transfer policies and small U.S.-based experiments we can look to, which tie the benefit to health check-ups, school attendance, or other similar factors. The point, however, is that any policies that are in place are ones that center on the parent—not the child.

The study is not without its limits. For one, it looks at a single population, both culturally and geographically. And, while other studies have looked at interventions that are similar in size, they are not similar in duration—the casino benefit is a permanent change for this population. Akee and his team, however, undoubtedly give a boost to the argument that if we want to really improve children’s futures, money does matter.