Ask an FCAT Researcher: Deanna Laufer on Shrinking Families

Recently Deanna has been digging into the data around the changing nature of families, zeroing in on the fact that fertility rates are declining in every industrialized nation. People today have fewer siblings (and aunts and uncles and cousins) which impacts how they find jobs, develop relationships, and build resiliency.

Understanding these changes is important to Fidelity, as we help customers navigate their financial lives when they face challenges such as overlapping caregiving responsibilities and the complexities around estate planning. If someone has children, an estate might be divided among them. But what about the growing number of people who are childless? These customers may be more interested in charitable giving.

Q: If the American family is shrinking now, what will it look like in the future? Say 75 years?

A: Smaller still. In 1950, it wasn’t unusual for someone to have 60 or more living people in their extended family. By the end of this century, it is going to shrink down to about 18 people. But it’s not just the size of the family that’s changing, it’s the structure. Think back to first or second grade when you probably had a class project to create a family tree. It likely would’ve been written on a horizontal piece of paper because you had to include all of your siblings and cousins. Now, because people are having fewer children, that family tree might be more vertical. People don’t have as many cousins and because of increased longevity, more kids might include their great-grandparents on the drawing.

Q: And it’s not just here, right? Families are shrinking across the globe?

A: Yes, and no matter how many programs countries put in place to help pay for childcare or give parents more time off work, the trend is not reversing. People just don’t want as many children as they did in the past. There are a lot of reasons for that. People are getting married later, so they are having children later. Biologically, they may only be able to have one child, or maybe none at all. But people also want to be able to give their child a good lifestyle — piano lessons, gymnastics, and soccer — things that might not be possible in larger families. In smaller families, more of the children are able to go to college. They may transition into adulthood with less debt. They are also more likely to inherit money from their parents and be on a better path to wealth. However, more wealth in fewer hands can also exacerbate inequality.

Q: I have never thought about it this way, but the larger families of the past meant more job opportunities for family members?

A: There is a lot of research on this. I learned that entrepreneurs are much more successful when they have family members who invest in their business. I found another study that showed migrants who moved from Mexico to the United States were more likely to find a job if they had extended family here. And those jobs were higher-paying. These job networks are integral to people’s well-being.

Q: My wife and I have one daughter, but each of us grew up with three siblings. I often think about how her childhood has been vastly different from ours.

A: More people are growing up as only children. What does someone miss when they don’t have a sibling relationship? Maybe nothing? Perhaps it just means that you have closer relationships with friends to fill the gap. As families continue to get smaller, people will need to fill that gap the family used to provide, whether it’s finding a job, or taking care of aging parents. These gaps could be filled by non-sibling members of the family, or it could be a paid service.

Q: And this extends to financial planning? I have been deeply involved in estate discussions with my own parents, but people without children would have a much different journey.

A: It is both a challenge and an opportunity for financial services companies and advisors — to help customers who don’t have children fulfill their wishes for their financial legacies. Often this can mean guidance for charitable giving. But even for people who do have children, estate planning is becoming more complex. More people are choosing to give money to their children in unequal amounts, particularly if one child is providing more caregiving to their parents than the others. Interestingly, people will sometimes also leave more money to the children who have provided grandchildren. You can imagine the kind of conversations these people are having with their financial advisors.