LCC Working Paper Series: 2015-15

Authors

Philipp Lersch and  Janeen Baxter

Non-technical Summary

Many children in Australia experience the separation of their parents. These separations may have negative consequences for children at the time of the event and later in life. In this study, we are interested in how parental separations during childhood may influence economic wealth of adult children in Australia. Economic wealth is the sum of all assets less debts owned by a household.

We examine wealth as it is an important resource providing financial security, stability and a safety net for rainy days. If adult children are excluded from these benefits after parental separation, their financial wellbeing may be reduced compared to adult children from intact families. Adult children with separated parents may also be likely to pass on this wealth disadvantage to their own children.

We use recent, representative Australian data for our study. We find that parental separation is associated with substantially less wealth for adult children. The negative association is limited to adult children who experienced parental divorce before age 15. Despite the different context in Australia, our findings are broadly consistent with earlier findings from the United States indicating that parental separation is consequential across different societies.

The association of parental separation with adult children’s wealth changes little over children’s lives. As children from disrupted families grow older, they do not catch up with children from intact families in terms of their wealth. Thus, the wealth disadvantage of growing up in a disrupted family persists over time.

Our findings suggest that the most likely pathway through which parental separation influences adult children’s wealth is through the partnership and childbearing choices made by adult children who experienced parental separation. It seems likely that due to the experience in disrupted families, adult children have attitudes and partnership skills which reduce their chances to maintain stable partnerships later in life. Unstable partnerships hamper the accumulation of wealth.

Published

July 14, 2015