The use of savings as a family resource management strategy to meet child rearing costs

This study examines the effect of children on family savings decisions over the life cycle. The model used is a multinomial logit budget share allocation model. The data are from the 1982 Canadian Family Expenditure Survey Data. Results indicate that the addition of a child to a family results in fewer assets being accumulated than if the child was not present. As much as 43% of direct child rearing costs may be met through this substitution out of future consumption. Closer analysis reveals that accrual of housing equity is relatively unaffected by child's presence and that substitutions occur primarily out of other types of savings instruments.The authors would like to acknowledge financial support from the Social Science and Humanities Research Council of Canada (Grant #1498-85-0005), the Department of Consumer Science, University of Wisconsin, Madison and the College of Home Economics, University of Saskatchewan. However, all opinions expressed are our own and do not necessarily reflect the views of our sponsors. Special thanks is due Susan Bruns for outstanding research and computer programming assistance. The authors accept responsibility for any errors or omissions. All correspondence should be directed to Prof. Douthitt at 1300 Linden Drive, University of Wisconsin, Madison, Wisconsin 53706.Robin A. Douthitt received her Ph.D. from Cornell University. She is an Associate Professor, Department of Consumer Science and the Institute for Research on Poverty, University of Wisconsin, Madison, WI 53706. Her research interests include the relationship between child support awards and child rearing costs, and family time use.Joanne M. Fedyk received her M.S. from the University of Saskatchewan. She is currently an Assistant Professor in the College of Home Economics, University of Saskatchewan S7N OWO, Canada. Her research interests include both the cost of raising children and the valuation of homemaking services.