Household Asset Allocation, Offspring Education, and the Sandwich Generation

Family size has always been a key factor affecting household investment decision making behavior (Browning 1992). Yet, recently, household financial decision making issues have become even more acute for millions of households that are part of the “Sandwich Generation.” Households with children approaching collegeage are now providing financial support for aging relatives. This combined with the continued rising cost of college tuition has meant that even more families struggle with decisions about financing the college education of their children and other portfolio choice decisions. Parker and Patten (2013) find that in 2005 around 12 percent of middle-aged adults were providing financial support to both an aging parent and a child and by 2012 that number had increased to 15 percent. There is a substantial empirical literature documenting the household characteristics and traits that influence household investment behavior and college saving behavior. Empirical research shows that household investments increase with wealth and household head education and are sensitive to transaction costs (Bogan 2008). Bertaut and Haliassos (1997) show that labor income risk and bequest motives affect stock market participation. Both physical (Rosen and Wu 2004) and mental (Bogan and Fertig 2013) health influence investment behavior. Further, Choudhury (2001/2002) finds that minorities in the United States have lower financial market participation rates than white households. Similarly, family income is shown to be an important factor in family financial planning for college education and college enrollment (Acemoglu and Pischke 2001). Yilmazer (2008) Household Asset Allocation, Offspring Education, and the Sandwich Generation