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Report: Millennials are broke because they're making choices out of order

CNBC logo CNBC 2017-07-11 Kathleen Elkins
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A record 55 percent of millennial parents have had children before getting married — compared with 25 percent of the youngest baby boomers who did the same — and the trend could be costing them.

That's according to a 2017 report published by Wendy Wang and W. Bradford Wilcox, which found that "the most financially successful young adults today continue to be those who put marriage before the baby carriage."

Specifically, 86 percent of young people who got married before having kids are among the middle or top third of earners, while just 53 percent who put childbearing first have incomes in the middle or top third.

"Even millennials from low-income families are more likely to flourish if they married before having children: 71 percent who married before having children made it into the middle or higher end of the income distribution by the time they are age 28-to-34," report Wang and Wilcox. "By comparison, only 41 percent of millennials from lower-income families who had children first made it into the middle or higher end of the distribution when they reached ages 28-to-34."

As CNBC's Ester Bloom reports, being born to single moms or to unmarried partners "can be rough on families for numerous reasons. Pooling resources can make many aspects of life easier, from affording a home to being involved at school. Coupling up also helps people stay healthier and live longer, especially men."

Wang and Wilcox's findings support the idea of a "success sequence," which was first introduced by Ron Haskins and Isabel Sawhill of the Brookings Institution in 2009. It says that the path to economic success and away from poverty is to do things in order: 1) Earn at least a high school diploma, 2) get a full-time job, and 3) marry before having kids.

"Only three percent of millennials who followed all three steps, in sequence, are poor by the time they reach their late twenties or early thirties," Wang and Wilcox report. On the flip side, more than half of millennials who didn't follow the sequence are in poverty.

Of course, that can be easier said than done, especially in poorer communities with fewer resources and substandard schools. And "no statistical model can perfectly predict a youth's future success," the report notes. "Some young adults (albeit a small share) who missed all three of the steps still manage to reach the top third of the income distribution. On the other hand, a small share of young adults who had all three factors are in the bottom third."

If you want to improve your chances of experiencing economic success, the numbers suggest it's smart to secure an education, a job and a spouse before having kids.

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