Leaving the Financial Nest: Connecting Young Adults' Financial Independence to Financial Security
| Author | Youngmin Yi,Megan Doherty Bea |
| Date | 01 April 2019 |
| DOI | http://doi.org/10.1111/jomf.12553 |
| Published date | 01 April 2019 |
M D B Y Y Cornell University∗
Leaving the Financial Nest: Connecting Young
Adults’ Financial Independence
to Financial Security
Objective: This study examines variation
in young adults’ transitions to nancial inde-
pendence and the relationship between these
transitions and nancial security.
Background: Individuals rely on their fami-
lies for substantial nancial support well into
early adulthood, even as young adults perceive
independence as a key marker of adulthood.
Given known variation in transitions to adult-
hood and unequal exposure to nancial pre-
cariousness across social groups, the authors
ask whether heterogeneity emerges with regards
to the timing of nancial independence and types
of support received and how differences in path-
ways to independence may matter for nancial
security later in young adulthood.
Method: The authors estimate group-based tra-
jectory models of four indicators of nancial
independence for 1,719 young adults from age
18 to 27 using data from the 2005 to 2015
Panel Study of Income Dynamics. These trajec-
tories are then used to estimate predicted levels
of nancial security at the end of the study period
using logistic and linear regression analysis.
Department of Sociology, Cornell University, 323 Uris
Hall, Ithaca NY 14853 (mad337@cornell.edu).
∗323 Uris Hall, Department of Sociology, Cornell
University,Ithaca, NY 14853.
KeyWords:economic well-being, family economics, inequal-
ity, young adulthood.
Results: The results show that paths to young
adults’ nancial independence are best charac-
terized by four types of trajectories: consistently
independent (23%), quickly independent (41%),
gradually independent (23%), and consistently
supported (13%), with types and duration of sup-
port varying substantially across trajectories.
The authors nd that young adults experienc-
ing trajectories characterized by lower levels
of familial support also report higher levels
of nancial insecurity by the end of the survey.
Conclusion: The ndings suggest that the pat-
terning and timing of nancial independence
in the transition to adulthood has implications
for early adult nancial well-being.
In the United States, the transition to adulthood
is a stage of the life course that is marked by
change and uncertainty across many domains,
including nancial life. Two major economic
trends are likely shaping the contours of the con-
temporary transition to nancial independence.
First, young adults today face signicant nan-
cial burdens, in large part due to the rising costs
of postsecondary education and housing, which
affect the likelihood that individuals in this life
stage are able to reach nancial independence
and, perhaps more important, nancial security
(Addo, Houle, & Simon, 2016; Houle, 2014;
Killewald, 2013). Second, young adults’ reliance
on parental resources into early adulthood is
increasingly common, even as they “achieve
adulthood” in other ways, such as when starting
Journal of Marriage and Family 81 (April 2019): 397–414 397
DOI:10.1111/jomf.12553
398 Journal of Marriage and Family
one’s own family or entering the labor market
(Fingerman et al., 2015; Lee & Mortimer, 2009;
Sironi & Furstenberg, 2012). This suggests that
many may be delaying nancial independence in
efforts to manage this nancial uncertainty.
Research highlighting this trend underscores
the delayed transition to nancial independence
for young adults via examinations of intergen-
erational monetary transfers and parental cores-
idence or “doubling up” (e.g., Sandberg-Thoma,
Snyder, & Jang, 2015; Swartz, Kim, Uno, &
Mortimer, 2011). However, less is known about
whether and how different types of nancial sup-
port co-occur, who receives which types of sup-
port, and for how long, although the presence of
broader heterogeneity in the transition to adult-
hood with respect to race/ethnicity, socioeco-
nomic status (SES), geography,and other dimen-
sions is well documented (e.g., Gonzales, 2011;
Hardaway & McLoyd, 2009; Osgood, Foster, &
Courtney, 2010; Waters, Carr, Kefalas, & Hold-
away, 2011). Importantly, research focused on
perceived delays in the attainment of nancial
independence does not connect such perspec-
tives to nancial security, making the implica-
tions of heterogeneity in young adults’ nan-
cial independence trajectories for their nancial
well-being unclear.
In this study, we used data from the 2005 to
2015 Panel Study of Income Dynamics (PSID;
http://psidonline.isr.umich.edu/) to answer three
key questions. First, what are young adults’
pathways to nancial independence during the
transition to adulthood? Second, how do these
trajectories vary in their structure and who expe-
riences which types of nancial trajectories?
Finally, how are these nancial independence
trajectories related to nancial security in the
transition to adulthood? We employed a rich
descriptive longitudinal modeling strategy for
our two-part analysis. We began by estimating
group-based trajectory models to identify pat-
terns in young adults’ transitions to nancial
independence as captured by multiple indicators
that identify when and for how long young adults
receive parental support for housing, tuition,
and bills, and whether these types of support
co-occur. Second, we explored the relationship
between young adults’ nancial independence
trajectories and their levels of nancial secu-
rity using logistic and ordinary least squares
regressions.
We found signicant heterogeneity in path-
ways to nancial independence and importantly,
that this variation mattered for young adults’
levels of nancial worry and their likelihood
of exposure to poverty. Relative to those who
remained nancially supported by family later
into the transition to adulthood, young adults
who did not, or could not, rely on this sup-
port were more likely to be nancially insecure
in their late 20s. We argue that family sup-
port may serve as an important buffer against
nancial hardship for young adults, but that this
option may be restricted to those who come from
socioeconomically advantaged backgrounds.
T B
The Transition to Adulthood in a Context
of Economic Uncertainty and Inequality
Nearly all young adults consider nancial
independence to be a key marker of adulthood
(Furstenberg, Kennedy, McLoyd, Rumbaut, &
Settersten, 2004; Hartmann & Swartz, 2006;
Hartnett, Furstenberg, Birditt, & Fingerman,
2012). However, in today’s economy, this
expected milestone may be difcult to achieve.
The burden of complex decision-making regard-
ing debt, equity, and nances more generally
has shifted from nancial experts to households
and consumers (Fligstein & Goldstein, 2015;
Hacker, 2006; van der Zwan, 2014). Job pre-
cariousness and low wages have become more
prevalent within the United States, increas-
ing income insecurity for many young adults
(Danzinger & Ratner, 2010). At the same time,
traditional milestones thought to characterize
the transition to adulthood, such as the com-
pletion of one’s education and establishment
of an independent household or family, require
signicant nancial investment. Rising housing
costs and expansion of the pursuit of postsec-
ondary education have made the assumption
of major expenses and debt for housing and
schooling normative and growing components
of young adults’ nancial lives (Addo et al.,
2016; Joint Center for Housing Studies, 2016;
U.S. Department of Education, 2016). Many
young adults are facing signicant nancial
burdens and uncertainty while navigating this
economic landscape with varying levels of
resources, skills, and knowledge—both their
own and those of their families—as they move
toward nancial independence (Silva, 2012).
For our cohort of interest, coming of age in
the mid-late 2000s, navigating the transition
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