Do Households Save More When the Kids Leave? Take Two


The brief’s key findings are:

  • When kids leave home, parents consume less but they don’t save more. So where is the money going?
  • The analysis looks at three ways to square the circle:
    • define saving more broadly: parents could be paying down debt faster;
    • define consumption more broadly: they could be assisting grown children; and
    • define income more precisely: they could be earning less than before.
  • The results support the third explanation: when kids leave, parents work and earn less.
  • But the results also show that consumption still declines relative to income without any rise in net worth, so this study does not fully resolve the puzzle.

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