On any given day, approximately 2.1 million children in Europe have an incarcerated parent. Although research indicates that material hardship is associated with parental incarceration, and particularly paternal incarceration, little is known about family processes that may mitigate the harmful effects of such hardship on children with an incarcerated parent. Guided by a resilience framework, this study examined how family processes mediate the effects of material hardship on youth academic adjustment within the context of paternal incarceration. Using Danish data that assessed key family constructs, structural equation modeling was used to perform a mediational within-group analysis of primary caregivers (n = 727) to children with an incarcerated father. Results indicate that although social support and parenting skills did not yield mediating effects, caregiver mental health strongly mediated the effects of material hardship on youth academic adjustment during paternal incarceration. Findings suggest that economic conditions, as well as caregiver mental health symptoms, are important areas of intervention that may promote family-level resilience for youth of an imprisoned father. We conclude with research and practice recommendations to advance our understanding of resilience among families with an incarcerated parent.