536 American Economic Review: Papers & Proceedings 2017, 107(5): 536–540 https://doi.org/10.1257/aer.p20171145 Child disability is a growing issue in the United States and more and more children are suffering from mental disabilities. A total of 13 percent to 20 percent of children living in the United States experience a mental disorder in a given year, and surveillance during 1994 through 2011 has shown the prevalence of these condi- tions to be increasing (Perou et al. 2013). While childhood disabilities related to physical health concerns have decreased relative to the early 2000s, disabilities due to neuro-developmental and mental health problems increased dramat- ically between 2001 and 2010. It is estimated that nearly six million children had a disability in 2010—an increase of almost 1 million from the 2001 estimates (American Academy of Pediatrics 2013). As a result of these trends, mental disorders among children are becoming an increasingly important public health issue in the United States, with an estimated total annual cost of $247 bil- lion (Perou et al. 2013). In general, the severity of the child’s condition is the most important predictor of economic costs, particularly in the form of foregone earnings or labor mar- ket opportunities, but also direct out-of-pocket expenditures. Powers (2001) fnds the estimated impact of offspring disability on employment is similar to the effect of a woman’s own failure to complete college or of adding an additional child under age fve to the family. Cidav, Marcus, and Mandell (2012) fnd that on average, mothers of children with autism spectrum disorder (ASD) earn 35 percent less than the mothers of children with another health limitation and 56 percent less How Children with Mental Disabilities Affect Household Investment Decisions † By Vicki L. Bogan and Jose M. Fernandez* * Bogan: Cornell University, 201K Warren Hall, Ithaca, NY 14853 (e-mail: vlb23@cornell.edu); Fernandez: University of Louisville, Louisville, KY 40292 (e-mail: jose.fernandez@louisville.edu). All errors are our own. † Go to https://doi.org/10.1257/aer.p20171145 to visit the article page for additional materials and author disclosure statement(s). than the mothers of children with no health lim- itation. Newacheck and McManus (1988) show that charges and out-of-pocket medical expenses were two to three times higher on average for disabled children compared with other children. Sharpe and Baker (2007) fnd that for families with an autistic child, many survey respondents forfeited future fnancial security and even experienced bankruptcy to provide therapy for a child with autism. With regard to caring for children with disabilities, documented effcacy of early intervention heightens the intense pres- sure to use whatever means possible to secure needed therapy—including placing the family’s fnancial future at risk. Beyond labor force participation decisions, other household fnancial decisions may be affected by children with mental disabilities. It may be the case that children with mental disabilities directly affect household invest- ment decisions in a manner that curtails house- hold wealth accumulation. Yet, little is still known about the effects of children with men- tal disabilities on household portfolio choice decisions. In this paper, we attempt to add to this area of research by analyzing how children with mental disabilities infuence household invest- ment decisions. We fnd that households with at least one special needs child generally have a decreased probability of holding risky assets. However, those households with at least one special needs child that do hold risky assets have a larger percentage of their fnancial wealth in risky assets. I. Data We use US data from the biennial Panel Survey of Income Dynamics (PSID). This nationally representative panel survey contains questions on income, assets, earnings, occupation, mari- tal status, family structure, child characteristics,