How Low Birth Rates Could Affect Your Wallet

Published on: May 5, 2021fb-roundtwitter-roundemail-round

Birth rates have been on the decline for the past several years. Many thought staying at home during the pandemic (and getting a lot closer than six feet apart) would reverse that trend. But now experts say we're actually looking at a baby bust.

What you need to know: This week, the CDC said the US birth rate fell 4% in 2020. That's the sixth straight yearly drop and the lowest rate since 1979.

Your move: Fewer babies means you might get to spend less on shower gifts. But low birth rates can affect your wallet in other ways, too. Here's what you need to know:

  • You might need to invest more for retirement. A declining birth rate means eventually there’ll be fewer workers to pay the taxes that fund public programs like Medicare and Social Security (which is already having financial problems). That means your tax rate could go up. Or Social Security benefits could change. Investing as much as you can for your future can help you maintain the life you want in retirement – no matter how much money the gov can afford to give you.

  • You could pay more for new-mom and baby products. Companies that make baby supplies, car seats, and toys have already felt the blow. To help curb losses, some – like Pampers and Huggies – have started developing alternative and more sophisticated products (think: fancy and plant-based diapers) to justify higher prices. (Psst...some of these companies are also increasing prices due to rising commodity costs.) If you're adding a tiny plus-one to your fam, make sure to factor these potential higher costs into your new-parent budget.

  • We may see more recessions. More workers generally = a bigger economy. And vice versa. Meaning that steadily declining birth rates could be an indication of future economic trouble. A few ways to recession-proof your money: feed your emergency savings account, pay off debt, and live within your means.

theSkimm: Babies are expensive. Turns out, Americans not having babies could cost you money, too. Working on your savings — the kind you can use in the short term and to live off of in retirement — is a good defense. No matter what happens next.

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Skimm'd by: Ivana Pino, Stacy Rapacon, and Elyse Steinhaus