500,000 Reasons Why Millennials Are Having Fewer Babies

In the US, the average age of a first-time mother is now over 26 years old, up from 21.4 years-old in 1970.

Through 2008-2013, the birth rate declined each year, likely the result of the financial crisis and its aftermath. Furthermore, as Goldman's Taposh Bari notes, amid the decline in births since the beginning of the Great Recession, one thing that stands out is that the decline in births has come from the youngest mothers – women under 25 years of age.

There are a number of factors that have contributed to this continued increase including: (1) advances in medicine which have increased life expectancies and are making pregnancies safer and more successful for older women; (2) higher levels of educational attainment among women; (3) the aftermath of the great recession which has led to weaker job prospects and confidence about the future; and finally, and perhaps most importantly (4) highly inflationary education costs, which, coupled with lower wages and  igher educational attainment, have led to higher levels of student debt.

The cost of raising a child

A skittishness around family formation is bourne out in other data series like rates of home homeownership and marriage. Having a child is probably one of the most expensive decisions a parent will make in their life. In 2013, the annual cost of raising a newborn was approximately US$13k for married families in the middle income bracket in the US. On a cumulative basis through age 17, families having babies will have to commit to US$245k in total spending per child (US$304k accounting for inflation).

The exhibit above excludes the cost of a college education (and all other costs for children over 17 years-old), which was US$19k (4-year public school tuition, room and board) for enrollment in the 2014-2015 academic year. Inflation adjusted, this cost is up 80% over the past 20 years, growing at real and nominal CAGRs of 2.9% and 5.4% respectively over that period.

Assuming that the rate of college education continues at its current pace, Millennial parents can expect their newborn’s college education to be US$205k, making the total cost of raising a child over US$500k.

Source: Goldman Sachs