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Are millennials financially prepared for parenthood?

Research indicates that millennials parents prioritize emergency savings, budgeting and health insurance over end-of-life planning financial tasks.

stats about millennials

I have to be honest: I’ve never understood the fuss around millennials’ well-documented passion for avocado toast. Avocado toast is good! And reasonably healthy! We should be thanking millennials for pushing it to the fore, not mocking them for it.

And you know what else? Millennials, more than any previous generation, have sought to pair their version of consumerism with some level of global consciousness. (Per a 2015 report, for example, 73% of millennials are willing to spend more on sustainable products.) This is the generation that supports the give-back brands, and insist that what they buy is responsibly sourced, inclusively marketed and, to the extent possible, helps make the world a better place. Again, this seems like something to praise, not scorn.

Which brings us to the next phase of the millennials’ lives: Parenting, that moment where one’s ideals inevitably clash with one’s reality. Not only is parenting a challenge for one’s principles, but it can also be a challenge to one’s pocketbook, too. Researchers at Haven Life surveyed 500 adults (median age: 32) who plan to have a child in the upcoming New Year to understand if they’re up for the financial challenges that come with parenting. (They better be considering roughly 9,000 babies per day are born to millennial parents.)

On the one hand, millennials are embarking on major life milestones later than previous generations, so they might be on surer financial footing than their parents were. On the other hand, they’re doing so amid an uncertain economy and stagnant wage growth, which can make it difficult to set aside money and plan for parenthood.

Overall, there seems to be a gulf between how ready these would-be parents feel, and how ready they actually are. Except that gulf goes the opposite way you might expect. To understand what we mean, see our takeaways below.

Millennial parents feel ready for what’s coming.

An overwhelming 82% of survey respondents said they feel financially prepared for having a child in 2019. (To which any expert reading this might say: Yeah, sure, ok.) This seems like a good thing, but we’ll outline below why it might not be.

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Millennial parents are planners.

A healthy plurality (36%) of those expecting to have a baby in 2019 have been planning for four to six months; one in five say they have been planning for more than a year. Only 7% fess up to having done no planning at all. (Pro tip, guys: You have about three months to start this project if you want to hit your deadline of having a baby in 2019.)

They say they’re taking financial steps….

Given a list of eight options (and the ability to choose more than one), a solid 72% of respondents say they’ve increased their savings / emergency fund in advance of having a child. More than half maintain (and stick to) a household budget and have reviewed their health insurance benefits. After this, things get a little less promising—especially around end-of-life planning. Only 40% have bought life insurance, and only 30% have created a will. Suffice it to say both of these are incredibly important steps to help ensure your loved ones are financially cared for if one parent were to pass away.

…and their savings show that’s not quite true.

In addition to the above concerns around life insurance and creating a will, we are also alarmed to learn that exactly 50% of respondents have less than $10,000 in savings. (For reference, most experts recommend having at least three to six months saved in an emergency fund.) That’s not a lot of cushion.

On the other end of the spectrum, one in 10 of those surveyed have more than $100,000 in an emergency fund.

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They know their policies.

Four in five millennial parents know the parental leave benefits at their (and/or their partner’s) work. And a whopping 85% know their health insurance deductible. If knowledge is power, then this generation is extremely powerful on these two fronts. Another reassuring thing: Only 3% report having no health insurance, though ideally that 3 would be a 0.

They understand parenting costs money.

Based on that Department of Agriculture estimate, roughly 29% of respondents accurately understand the financial cost of parenting—that’s how many think it will cost roughly $250,000 to raise a child. Nearly half of respondents think it will cost more than that—26% said $500,000, while 23% said more than a million dollars. That leaves 22% of respondents who underestimate the costs—or plan to scrimp on diapers.

They’re not in this alone.

They say it takes a village to raise a child, and millennial parents certainly expect that village to pony up: 62% say they think friends or family members will assist with the cost of raising their child. Of course, how much assistance, and in what form, can vary wildly—from grandparents who make an annual 529 contribution to friends who help with babysitting.

They’ve already got college on the brain.

As we mentioned in our survey on millennial spending habits, this generation is more highly educated than its predecessors. Clearly, they’re already thinking about how the next generation will surpass them, as 96% expect to pay for part or all of their child’s college education, with 54% of all respondents expecting to bear 100% of the costs.

They say have a plan in case the worst should happen.

While only 40% have bought life insurance, 79% of those surveyed say they have a financial plan in place in case something happens to them and/or their partner. (Again, we’d hope that number would be 100% by this time next year.) We would argue that there’s some discrepancy there as a true plan would include life insurance.

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They say that, with parenting, you’re never really ready—you’re only ready enough. And indeed, the financial preparation is only one small part of bringing a bundle of joy into the world. (There’s also the emotional planning, the spiritual planning and of course the joys of assembling an Ikea crib.)

So while millennials sometimes get a bad rap, we suspect a survey of an earlier generation might have felt more dire. There’s definitely room for improvement, but the fact that nearly 4 in 5 say they have some form of financial plan, is encouraging. Now, excuse us while we go make some delicious avocado toast…

Louis Wilson is a freelance writer whose work has appeared in a wide array of publications, both online and in print. He often writes about travel, sports, popular culture, men’s fashion and grooming, and more. He lives in Austin, Texas, where he has developed an unbridled passion for breakfast tacos, with his wife and two children.

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Unless noted otherwise, statistics are from a quantitative survey conducted by Haven Life between November 21 – 28, 2018 and collected N=500 completes. Consumers were between 18-49 and had to be planning of becoming pregnant or add a child to the family in the upcoming New Year.

The information provided is not written or intended as specific tax, legal or investment advice. Haven Life Insurance Agency does not provide tax, legal or investment advice. Individuals are encouraged to seek advice from their own tax or legal counsel, or financial advisor.

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About Louis Wilson

Louis Wilson is a freelance writer whose work has appeared in a wide array of publications, both online and in print. He often writes about travel, sports, popular culture, men’s fashion and grooming, and more. He lives in Austin, Texas, where he has developed an unbridled passion for breakfast tacos, with his wife and two children.

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Haven Life is a customer-centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our editorial policy

Haven Life is a customer centric life insurance agency that’s backed and wholly owned by Massachusetts Mutual Life Insurance Company (MassMutual). We believe navigating decisions about life insurance, your personal finances and overall wellness can be refreshingly simple.

Our content is created for educational purposes only. Haven Life does not endorse the companies, products, services or strategies discussed here, but we hope they can make your life a little less hard if they are a fit for your situation.

Haven Life is not authorized to give tax, legal or investment advice. This material is not intended to provide, and should not be relied on for tax, legal, or investment advice. Individuals are encouraged to seed advice from their own tax or legal counsel.

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