How Low Birth Rates Could Affect Your Wallet

Published on: Jun 7, 2021fb-roundtwitter-roundemail-round

Birth rates have been on the decline for the past several years. And while many thought staying at home during the pandemic (and getting a lot closer than six feet apart) would reverse that trend, experts say it turned out to be a baby bust.

What you need to know: The CDC said the US birth rate fell 4% in 2020. That's the sixth straight yearly drop and the lowest rate since 1979. Turns out, that could bring some economic growing pains.

Your move: Here's how you can prep your finances.

  • 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 a comfy retirement on your terms – no matter how much the gov can afford to give you.

  • You could pay more for certain 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.

This is depressing.

Bright side? Not so many people could be better for the environment and less strain on the world's resources. Because overpopulation can cause economic problems, too. If the gov wants people to have more babies, it could introduce policies to help. Think: paid parental leave and easier access to affordable child care.

theSkimm: The world's birth rate can impact where the economy is heading. Because children are the future...consumers, investors, and labor force. That doesn't mean you should change your baby-making plans one way or the other. But thinking about working on your savings – the kind you can use in the short term and to live off of in retirement – is a good defense.

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