Investing in Children: Changes in Parental Spending on Children, 1972 to 2007

31 March 2010

by Dr Sabino Kornrich and Professor Frank Furstenberg

Parental spending on children is often presumed to be both one of the main ways parents invest in children and one of the main reasons children from wealthier households are more advantaged than children from poorer households. Given increasing income inequality, pressures to invest in children have likely grown over time. To track the extent of parental spending on children over time, we make use of the Consumer Expenditure Survey to examine how spending on children has changed over the period from the early 1970s to the late 2000s. We find that spending increased substantially over the period in large part because parents’ spending on education increased substantially. Increases in expenditures have been particularly sharp among those near the top of the income distribution and the college-educated, while the share of income spent has increased sharply among those near the bottom of the income distribution as they attempt to maintain spending in the face of declining incomes.