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.