Couples with kids and single parents are less likely to sock away money than couples or singles without children, according to MagnifyMoney’s analysis of the latest Federal Reserve Survey of Consumer Finances.
Raising kids can be expensive, but what does that mean when it comes to saving money for emergencies or the future? Here’s what else we found.
According to the findings, 62% of couples with kids put money into savings in 2019 — the same percentage as in 1992.
From 1992 to 2019, the percentage of couples with or without children who were able to save money ranged from 53% (in 2010) to 68% (in 2001). However, for couples with kids, that rate never rose above 62% in this period. Meanwhile, the biggest dip for childless couples was in 2013, when the rate was 61%.
DepositAccounts founder Ken Tumin said people generally fall into two categories — spenders and savers — and spending habits don’t necessarily change when starting a family, especially if two spenders marry. The difference in lifestyles for those who have kids compared to those without could impact savings rates, Tumin said.
“More couples with children may purchase homes than childless couples,” Tumin said. “Some people consider the equity in their home as a sort of savings account. That may explain why fewer couples with children put money into their savings in 2010 when many people were struggling to pay their mortgages and avoid foreclosures after the Great Recession.”
Couples with kids have a median balance of $7,500 in their bank accounts, compared with $11,000 for couples without kids, or 32% less.
Just more than 4 in 10 (41%) single parents put money into savings in 2019, down 9% from 1992.
Just like couples with and without kids, single parents are consistently less likely to save money than their childless counterparts. The percentage of single parents who were able to save dipped to 36% in 2013 — the lowest percentage in the measured period.
Single parents in general face steep financial challenges: While couples with kids may be able to leverage two incomes and share the cost of raising a child, single parents are often left to do everything on their own. Single people without kids, by contrast, may only be responsible for themselves, making it easier to save money.
Another important aspect here is that there was a 40% difference in savings rates between single parents and singles without kids in 2019. In 1992, however, the difference was 15%. So it would appear that it’s becoming even more difficult for single parents to save than it was almost 30 years ago.
Single parents have a median balance of $1,300 in their bank accounts, compared with $3,000 for singles without kids, or 57% less.
Income matters when it comes to the ability to save, but it’s not necessarily a driving factor. Couples with kids, for instance, have a median income 15% higher than that of couples without children, even though they are less likely to save than those without kids.
By contrast, single parents ($35,600) and childless singles ($37,200) have relatively comparable incomes, with the latter earning 4% more.
“Children come with immediate expenses — tuition, school supplies, extracurricular costs and fees — that cannot be put off until next year, like the purchase of a new car or a down payment of a house,” Tumin said. “So at the end of the month, there just is less ‘extra’ money to put into a savings account. Sadly, many parents set themselves up against unattainable standards and feel guilty when they fall short.”
This guilt can come from many directions, from wanting to spend more time with their kids (which often translates to less time working) to being able to afford an expensive Disney vacation. Unfortunately, those all have financial consequences that make parenthood that much more difficult to afford.
Income may not vary the ability to save as much, but debt absolutely can. Couples with kids, for example, have a median debt 75% higher than that of couples without children. In fact, 17% more couples with kids hold debt compared with couples without.
Single parents also face elevated difficulties, as 75% of single parents carry a median $30,500 in debt, compared with 71% of childless singles who carry a median $27,000 in debt. This added financial responsibility becomes even more pronounced for couples with children versus those without:
Couples with kids have a higher median debt balance in every type of debt highlighted here, including:
But, bucking the trend, single parents carry less mortgage and auto debt than childless singles.
Singles with lower incomes, for example, may less likely be able to get certain financial products, like a mortgage or other installment debts. Or they may need to opt for lower loan amounts or credit limits. That could help explain why they experience lower levels of debts.
Couples with kids and single parents alike have options to boost their savings account balances. Here are three options:
Researchers analyzed the Federal Reserve’s 2019 Survey of Consumer Finances to determine the percentage of families who saved, had bank accounts and carried various types of debts, as well as their median incomes, bank holdings and various debts. They were divided based on whether they identified as couples with children, couples without children, singles with children or singles younger than 55 without children.