Investing in children: Changes in parental spending on children

 
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Americans have been shifting the way they approach parenting and family dynamics over the past few decades. Parents are having fewer children, but they are also spending more “intensive” time with them, and they appear to be investing more money and resources. These behavioral changes are taking place even as the costs of child care are rising, long-standing problems associated with day care continue to be spotlighted and the work demands for middle-class families have increased.

A 2012 study published in the journal Demography, “Investing in Children: Changes in Parental Spending on Children, 1972-2007,” examines the variations in spending and how such investment decisions are linked to factors such as household income, parents’ education and family structure. The study was conducted by researchers Frank Furstenberg of the University of Pennsylvania and Sabino Kornrich of the Juan March Institute in Spain.

The data analyzed come from the Consumer Expenditure Survey (CES), a survey of consumer spending behavior conducted by the U.S. Bureau of Labor Statistics. The researchers note that the data they use “focus on goods and services intended for children, such as education, child care, and a range of consumer goods, including clothing for boys, girls, and infants; and various toys and games.” Other measures of child expenditures, such as those used by the USDA in its “Cost of Raising a Child” reports, include food, transportation and health care costs; but the researchers point out that these often reflect changes in the economy broadly and do not necessarily reveal trends in “parent motivations to invest.” On the resource side, the researchers looked at participants’ pre-tax household income as well as benefits such as food stamps, which help reduce inequality.

The study’s findings include:

  • In the early 1970s, households with only girls spent $1,380 a year on these more discretionary items, significantly less than $1,660 spent by households with only boys. By the 1990s this type of spending had equalized, and by the 2000s spending on girls rose to $2,775, significantly higher than the average amount spent on boys ($2,245). (For the full current costs of raising a child, see at bottom of this post.)
  • In the 1970s parents spent more during their children’s teenage years, and less on young children and those above age 18. This trend changed direction in the 1980s and continued strongly in the 1990s and 2000s, when parents began spending more on their younger children as well as those above age 18, instead of the teen years. “Prior to the 1990s, parents spent most on children in their teen years. After the 1990s, however, spending was greatest when children were under the age of 6 and in their mid-20s.”
  • Parents with greater levels of education spend more on their children. In the 1970s, parents with college degrees spent $800 more than those without high school diplomas. The difference in spending between these households rose to $930 by the 2000s.
  • Over the most recent time period, those in the top income brackets spent amounts beyond what could be explained by household income levels. Further, low-income households seemed willing to spend increasingly higher percentages of their income on children, suggesting there is a floor below which parents do not cut spending on their children.
  • All income deciles spent greater shares of their incomes on children over the years. Indeed, a chief finding of the study is that “parents are investing more heavily in their children now than in the past.”
  • During the 2000s there was a drop in the percentage of incomes spent on children as well as a decrease in the real dollars spent. It is possible that larger shares of incomes went toward housing during this period, given the housing boom of 2006 and 2007.
  • “Still, both rich and poor spent greater shares of their income on children over time, suggesting that increasing investment and inequality of investment is not purely a result of changes in available income. Instead, increased parental investment may reflect growing pressures to invest in children.”

“In the race to the top, higher-income children are at an ever-greater advantage because their parents can and do spend more on child care, preschool, and the growing costs of postsecondary education,” the researchers conclude. “The costs borne by the family impose a growing burden on low- and moderate-income families, whose incomes have stagnated over the past several decades.”

For a sense of how this research fits into wider context, see this May 2013 column by Chrystia Freeland of Reuters. On a related note, also see the May 2013 Atlantic article “How to Make the U.S. a Better Place for Caregivers,” by Anne-Marie Slaughter.

In terms of exact current costs, the USDA’s 2012 report notes that “child-rearing expenses vary considerably by household income level. For a child in a two-child, husband-wife family, annual expenses ranged from $8,760 to $9,970, on average, (depending on age of the child) for households with before-tax income less than $59,410, from $12,290 to $14,320 for households with before-tax income between $59,410 and $102,870, and from $20,420 to $24,510 for households with before-tax income more than $102,870.” The USDA estimates that the total cost of raising a child through age 17 for those in the middle-income range is about $235,000 — and that’s prior to college.

Keywords: parenting, children, youth, consumer affairs, child care, extracurricular activities, daycare, working moms

    Writer: | Last updated: May 3, 2013

    Citation: Furstenberg, Frank; Kornrich, Sabino. “Investing in Children: Changes in Parental Spending on Children, 1972-2007,” Demography, September 2012. doi: 10.1007/s13524-012-0146-4.
     

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