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New report says millennials are broke because they're making choices out of order

New York City is one of the most expensive cities to raise a child.
Ghislain & Marie David de Lossy | Getty Images
New York City is one of the most expensive cities to raise a child.

A record 55 percent of millennial parents have had children before getting married — compared to 25 percent of the youngest baby boomers who did the same — and the trend could be costing them.

That's according to a new analysis of Bureau of Labor Statistics' Panel data by the American Enterprise Institute (AEI) and the Institute for Family Studies (IFS), 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. Just 53 percent who put childbearing first have incomes in the middle or top third, meaning 47 percent of millennials who have a baby first are considered lower income.

"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," the AEI and IFS report.

"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."

The new 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 20s or early 30s," the AEI and IFS report. On the flip side, more than half (53 percent) 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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