Background Associations between the characteristics of the family environment, in particular poverty and family structure, and cognitive development are well established, yet little is known about the role of timing and accumulation of risk in early childhood. The aim of this paper is to assess the associations between income poverty, family instability and cognitive development in early childhood. In particular, it tests the relative role of family economic hardship compared with family instability in affecting cognitive functioning at the age of 5 years.

Methods The study draws on data from the UK Millennium Cohort, linking data collected in infancy, age 3, and age 5 years. Cognitive ability was directly assessed at age 5 years with the British Ability Scales. Using regression models we examine associations between persistent income poverty, family transitions, and children's cognitive ability, controlling for family demographics and housing conditions, as well as child characteristics.

Results The findings suggest that the experience of persistent economic hardship as well as very early poverty undermines cognitive functioning at 5 years of age. Family instability shows no significant association with cognitive functioning after controlling for family poverty, family demographics, housing and a set of control variables indicating child characteristics.

Conclusions Persistent poverty is a crucial risk factor undermining children's cognitive development—more so than family instability.