Bad Economy? Fewer Babies

Bad Economy? Fewer Babies

If you were worried about the economy, would you put off having a child?

That's exactly what American women have been doing lately, as the birthrate has been dropping like a stone since the economy went bust in 2008.

In 2007—the same year the S&P 500 reached a record high—the number of births was a record high, at 4.3 million. But then, by 2009, as Americans saw their job prospects diminish and their savings shrink, the birthrate dropped to 4.1 million, the lowest number since 2004. And it looks like the number will drop even lower in 2010 to just over 4 million.

That’s 500,000 babies who were never welcomed into the world because of the recession.

Babies Go Bust

It’s no wonder. We recommend having at least $20,000 in the bank to cover the high cost of pregnancy and the first year of Baby’s life. But if you had that amount in your diversified investment account in October 2007, you would have seen it drop to about $11,500 by the next October. Plus, if you’re facing foreclosure like many Americans, the last thing you'd probably want is another little person in the mix.

At least it’s fortunate that women who are struggling financially and don’t feel ready for a baby will be more able to afford birth control come next year, thanks to this legislation.

So is this trend another unfortunate byproduct of economic woes—or a smart decision by thousands of women?

A Baby State of Mind

To prove it’s not just a cultural shift (like more women deciding to go child-free), the Pew Research Center studied the phenomenon state-by-state: States that experienced the worst economic declines also had the sharpest drop in births, and vice versa.

For example, North Dakota, which had the nation’s lowest unemployment rate in 2008, was the only state to see a slight rise in number of births that year. Meanwhile, Arizona—which got clobbered in the housing bust and subsequent economic decline—experienced a 4% drop in birthrates in 2008, the highest out of the 25 states for which data was available.

Unfortunately, your confidence in your ability to care financially for a child is correlated with race. The Hispanic population, which was hardest hit by the recession, experienced a larger drop in birthrates from 2008 to 2009, 6%, while the birthrate for white women dropped by 1.6%. Black women experienced a 2.4% decline in birthrates. This isn’t a unique event, either. During the Great Depression and the economic shock of the 1970s, the birthrate also slowed in response.

I Don’t Want a Baby … Yet

Interestingly, older women, who arguably can't postpone having a child (and probably feel more financially secure as well), are the only group who has seen a rise in fertility the past few years. So for now, it looks like the decision to be childless is not a permanent one, but a postponement. Women are saying, “I’m going to wait until I’m financially ready for this child,” not, “I can only afford to have a certain number of children in my life.”

When the recession finally does end—and it's anyone's guess when it will—we could see a mini baby boom, as women who have been putting off having children start to bring them into their more financially sound households, according to Professor Alicia Adsera at the Office for Population Research at Princeton. "I would expect that some of these 'delayed' births should  eventually materialize as things turn around," she says. Or, if the recession drags on too long, we may just see fewer children overall as women become too old to give birth, or decide, "that maybe they did not want to have as many children after all," a sort of rationalization after the fact.

LearnVest Supports Moms!

The birthrate may have declined, but there were still 4 million births last year. That’s a lot of new mothers navigating this new emotional and financial territory. LearnVest wants to give mothers the information they need to thrive financially, no matter what the economic outlook.

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For more stories on how to balance life as a mom in these economically murky waters, visit our LV Moms page.

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