Money Matters: Money Matters for Child Development

Raising families’ income is a key strategy for improving the lives—and life chances—of young children

We Americans like to believe that all kids have an equal chance to succeed. But in reality, “hundreds of studies have documented the association between family poverty and children’s health, achievement, and behavior,” wrote education professors Jeanne Brooks-Gunn and Greg J. Duncan in Future of Children.

And “more than a decade of research shows that increasing the incomes of low-income families—without any other changes—can positively affect child development, especially for younger children,” according to 2007 Congressional testimony by Jane Knitzer, director of the National Center for Children in Poverty. “Money matters for child development.” Why?

According to a study by Brooks-Gunn, Jean Yeung, and Miriam Livner, higher income improves children’s learning because it enables their parents to provide “better living conditions and learning materials . . . adequate food, and . . . high-quality child care.” More income improves children’s emotional development, on the other hand, because it relieves pressures that make parents “more likely to be emotionally distressed, less supportive, and to use punishment such as spanking.”

Better income, better outcomes

Money matters more for children with less

Researchers found: When family income increased, children were better able to identify colors, letters and shapes, and knew more words. When a family of four living in poverty saw an increase of $13,400 over three years, for example, children scored as well as those in families with twice the income.

How they know: This 2001 study tracked 1,216 low-income families with young children for three years and looked at how children performed on cognitive tests as family income changed.

Lifetime costs of early childhood poverty

Researchers found: Eliminating early childhood poverty would boost the lifetime earnings of an individual by (from) $53,000 to nearly $100,000, and reduce the risk for incarceration and dependence on programs like food stamps or welfare.

How they know: This 2005 study of data on individuals from childhood to adulthood looked at the relationships between childhood family income and adult outcomes, such as earnings, completed schooling, crime, and health.

EITC boosts student test scores

Researchers found: For each $1,000 increase in a family’s annual income, the children’s math scores went up by 2.1% percent, reading scores by 3.6%.

How they know: This 2005 study of 6,000 families over two decades compared increases in family income through the Earned Income Tax Credit and their children’s reading and math test scores.

More money for moms, more successful kids

Researchers found: When poor mothers had more money—whether from earnings or cash payments—their kids did better in school. They repeated grades less frequently and had fewer behavioral troubles.

How they know: This 2002 study compared Minnesota welfare families that got additional cash incentives with those that did not.