Child Penalties in Personal Finances: Evidence from Bank Data

Using detailed and comprehensive bank data, we study the impacts that children have on gender gaps in financial choices. It is well established that women are, on average, less likely to participate in risky asset markets and save less. We show that the arrival of children contributes to the gender gaps in these financial choices: At the exact point in time when women become mothers their propensity to participate in risky asset markets drops and their propensity to save through savings accounts does as well, the amounts they hold in savings accounts is reduced as well as their average monthly savings, and they draw down their private pensions. These outcomes are unaffected as men become fathers. We therefore conclude there are "child penalties" in personal finances that contribute to the gender gaps in financial choices.

Arna Olafsson is an Associate Professor of Finance at Copenhagen Business School, a Research Fellow at the Danish Finance Institute, a Research Affiliate at CEPR, a CEPR Household Finance Network Member, a member of The Center for Big Data in Finance (BIGFI) at Copenhagen Business School and a Research Fellow at the Pension Research Centre (PeRCent) at Copenhagen Business School. Her research focuses on Household Finance, Financial Intermediation, Behavioral Finance, Sustainable Finance, and Labor and Finance.