Household Consumption and Savings Around the Time of Births and the Role of Education

This study examines households’ financial situation around the time of births using a panel of Dutch households over the period 1987-1993. I find that at all levels of education households accumulate wealth before and draw on their liquid savings after having given birth to their first child. Nevertheless, households draw too little on their savings to offset the decrease in income due to a reduction in female labor supply. Consequently, consumption decreases with the birth of a child. Relative to households of highly educated women, households of women with a lower level of education have a stronger decrease in consumption with the birth of a child, which is due to a larger reduction in female labor supply and, consequently, a larger decrease in income.