Parenthood is expensive — but research suggests becoming a dad may also boost men’s earnings. Here’s how to turn that extra income into family wealth

But amid all those expenses, economists have consistently observed that many men actually see their earnings increase after becoming fathers.

It’s called the fatherhood premium: a phenomenon that’s been documented for decades alongside what’s known as the motherhood penalty, in which women’s earnings often slow after having children. Here’s why, and what fathers can do with their extra income to help support their families.

The economics of becoming a parent

Researchers have been studying the so-called “fatherhood bonus” for years, and many have found that dads tend to earn more after becoming parents.

A review of research highlighted by the World Economic Forum found that fathers often receive the bonus, with studies estimating their wages increase by roughly 3% to 10% after becoming parents. Mothers, meanwhile, tend to experience a “motherhood penalty,” with studies finding wage decreases of roughly 4% to 13%, depending on factors such as occupation, education and where they live.

Some economists argue that becoming a father prompts men to devote more time and effort to paid work (or pursue higher-paying opportunities) as they take on greater financial responsibility for their families. Others suggest that men simply become fathers during periods when their careers are already taking off. Employer perceptions still play a role, though, with supervisors consciously or unconsciously viewing fathers as committed, dependable or reliable employees, making them more likely to receive higher pay or promotions.

The studies underscore how becoming a parent can reshape men’s career trajectories. And if their income does rise, dads should be smart about how they’re using it.

Put any extra earning power to work

Whether a father’s income rises because of greater career ambition, employer perceptions or simply because parenthood coincides with higher-earning years, the financial opportunity is the same. Here’s how to put those extra dollars to work.