The Supplemental Nutrition Assistance Program (SNAP) helps working families meet their nutritional needs. Families whose earned income increases in a given month may have their SNAP benefits abruptly reduced or cut off in the following month. Using sentinel sample data from 2007–15 for families with children younger than age four, we investigated how SNAP benefit reductions or cutoffs resulting from increased income were related to economic hardships (food and energy insecurity, unstable housing, forgone health and/or dental care, and health cost sacrifices) and to caregiver and child health. PEDS® was used to measure developmental-behavioral status. After we controlled for covariates, we found that the groups whose SNAP benefits were reduced or cut off had significantly increased odds of household and child food insecurity, compared to a group with consistent participation in SNAP. Reduced benefits were associated with 1.43 and 1.22 times greater odds of fair or poor caregiver and child health/development, respectively. Policy modifications to smooth changes in benefit levels as work incomes improve may protect working families with young children from increased food insecurity, poor health, and forgone care.