IASP's Tatjana Meschede examines family financial transfers for the Federal Reserve Bank of Boston

May 11, 2015


In her role as a visiting scholar at the Federal Reserve Bank of Boston, the Institute on Assets and Social Policy’s Tatjana Meschede authored a new paper that examines the extent to which family financial transfers occur among Boston’s residents of color. Meschede found that the likelihood of receiving financial gifts differs greatly by race and ethnicity, with nonwhite households significantly more likely to assist their relatives. The Heller Communications team talked with Meschede about her other key findings and what they suggest for the future.

Heller Communications: Why is this issue important? 

Tatjana Meschede: Family financial transfers (large gifts, inheritance, payments for higher education, payments for a new home, etc.) have long lasting impacts for those who are fortunate to receive them. They are among the largest drivers of the racial wealth gap, reproducing racial wealth inequalities for generations to come. In this paper, we were able for the first time to break down the typical white/black divide, examining family wealth transfers among race and ethnic groups residing in the Boston Metropolitan Statistical Area. In addition, we were able to examine immigrant status, which further illuminated differences in family wealth transfers.

HC: Are there particular areas—education, for instance—in which this financial support disparity is particularly pronounced? 

TM: White students have a large advantage when it comes to their parents financially supporting their college education. The differences in the extent to which white and non-white respondents were financially supported by their families was the largest for higher education, and as a result, respondents of color had significantly higher college debt when compared to whites. For example, among U.S. born blacks who had accessed higher education, only 13% reported any family financial support towards their higher education expenses, compared to 51% among whites. 

HC: What is the impact, both short and longterm, of this financial support disparity?

TM: The negative net financial support (less likely to be the recipient of family financial transfers and more likely to provide financial resources in support of family) have long lasting negative impacts on the wealth building trajectories for communities of color. It will especially impact the next generations who will incur more debt and will be less likely to draw on family financial support when facing economic hardships (e.g. illness, unemployment). Immigrants face even more challenges.  Regardless of race or ethnic group, immigrant status independently predicted lower likelihood of receiving family financial support, providing them with few financial means to build a foundation of economic security for themselves and their families.

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HC: Can policy help solve this issue? How? 

TM: While policy cannot play a large role in promoting larger financial transfers among non-white households, it can mitigate the impacts of such transfers. We briefly touch upon three policy areas in our paper which include children's savings accounts, policies that reduce the debt burden of higher education, and the tax code with respect to home mortgage deduction which mostly benefit more affluent home owners and has no benefit for renters, predominantly households of color.

HC: Anything else you'd like to add about the report of this issue?

TM: The data analyzed in this report allow us for the very first time to portray racial wealth disparities for Boston's predominant communities of color, such as Caribbeans, Dominicans, Cape Verdeans, Puerto Ricans, and U.S. born blacks.