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The Financial Effects of Household Composition

by Julie Siwicki of the Financial Access Initiative

There is a clear connection between financial stability and marriage, though we remain stuck in a chicken-or-egg debate about causality. The issue has gotten attention from academics and policy makers dating back to 1965’s controversial Moynihan Report, while just last year Harvard economist Raj Chetty found that family structure is one of the strongest determinants of income mobility. Popular media has picked up on the conversation too – You’ve likely come across these recent New York Times or Washington Post features.

Data from the U.S. Financial Diaries give us an opportunity to zoom in on household composition and how it plays a role in financial well-being. First, a look at our sample: Families made up of two adults with children were the most common type of household we tracked. More than half of them were married (see chart 1.8). Family structure patterns aren’t constant across sites though, as illustrated by chart 1.9.

The figures above represent household composition at one point in time, while in reality over a quarter of USFD families had changes in membership over the study period (see charts 1.10 and 1.11).

We know that changes in household structure can make a difference in income and poverty level, and early USFD analyses show that it’s not necessarily in ways we might expect.

In cases where family members – adult or child – joined or left their household, almost a quarter of those members had a job. Forty-four percent were contributing any kind of income, like government benefits, to the family. One could think, therefore, that households with departing members would see a decrease in income and households with joining members would get an income boost.

In contrast, a first comparison between household poverty level in the months before and after a change in membership shows the opposite effect. Chart 2.14 shows how families gaining new members are more likely to see their relative income level decrease, while income levels are more likely to increase after someone leaves.


It’s still too early to know just how deeply this preliminary result speaks to the national conversation. We’ll want to understand whether the results are driven by the poverty measure calculation which accounts for household size in determining income level. It will also be important to separate the effects of adults versus children moving in and out. By digging deeper into these cases and its other fine-grained data points, USFD has an opportunity to provide a unique and timely lends on the financial implications of changing family structures.

This is part of a series explaining initial findings from the US Financial Diaries. The project is lead by principal investigators Jonathan Morduch (NYU) and Rachel Schneider (CFSI).  Julie Siwicki was a field researcher with the project and is now a research associate. The views expressed therein are those of the author, and not necessarily of the USFD project or its funders.