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

Sabino Kornrich, The University of Sydney
Frank Furstenberg, University of Pennsylvania

Parental spending on children is often presumed to be both a main way parents invest in children and a main reason 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 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 maintain spending levels in the face of declining incomes.