Money Matters: Does Money Affect Children's Outcomes? A Systematic Review

Kerris Cooper and Kitty Stewart

Evidence abounds that children in lower-income households do less well than their peers on many outcomes, including in health and education. But is money itself important, or do these associations reflect other household differences, such as parental education levels or attitudes toward parenting? This study examines whether money has a causal impact on children’s outcomes. Causation is notoriously difficult to establish in social science, but by making use of randomised controlled trials, natural experiments and sophisticated econometric techniques on longitudinal data, researchers are able to rule out the possibility that unobserved differences between households are responsible for apparent income effects.

We conducted a systematic review to identify all OECD and EU studies that have used these techniques to investigate the causal effect of money on children’s health, social, behavioural and cognitive outcomes, as well as those examining intermediate outcomes including expenditure on children’s goods, maternal mental health, parenting and the home environment. The evidence clearly indicates that money makes a difference to children’s outcomes. Poorer children have worse cognitive, social-behavioural and health outcomes in part because they are poor, and not just because poverty is correlated with other household and parental characteristics. Having found money does have an effect, the review draws on further evidence to examine how much money matters i.e. how large an impact might a given change in resources be expected to have? As well as a number of related questions, such as whether a given change in resources makes more difference to children in more disadvantaged households; whether money matters more at particular stages of childhood; and what we can say about the relative importance of short-term fluctuations in financial resources in comparison to a household’s long-term financial position.

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The following appendices provide more detailed information about the studies examined in the review, as well as a list of terms use used for the systematic searches:
Appendix 1: Search terms
Appendix 2: List of all main studies
Appendix 3: Details of main studies for children’s outcomes
Appendix 4: Details of main studies for intermediate outcomes
Appendix 5: Studies using structural equation modelling
Appendix 6: List of studies that test for a non-linear effect of income
Appendix 7: List of studies for importance of timing of income
Appendix 8: Secondary studies that investigate the importance of duration of low income