Are You Spending Too Much on Your Kids?

JANE BRYANT QUINN

Retirement savings -- or new iPods all around? How to keep them happy without mortgaging your future

Parents Who Pay Too Much

Are you one of them? You don't have to crunch any numbers to find out -- just answer these seven questions

1. If your kid asks for something special, will you buy it today instead of waiting for a birthday or the holidays?
2. If you have children older than 7, do you purchase what they need or want without asking them to contribute from their allowance or earnings?
3. Do you grumble about your kids' cell phone bills but pay them anyway?
4. Do you feel you have to throw big birthday parties because that's what other families in the neighborhood do?
5. In the kids' rooms, are there more toys and belongings than empty floor space?
6. Do you let your kids shop with your credit card without setting any limits?
7. Do you spend much more freely on your children than you do on yourself?

If you answered "yes" to more than two questions, you're probably spending too much on your kids.

What made me snap when I started looking at how much parents pay to raise their kids? Maybe it was seeing all those $400 Nintendo Wiis and $200 iPod Nanos fly off the shelves. Or perhaps it was the $10,000 "princess party" for a 3-year-old. Or the $879 Bugaboo "travel system" (that's the term for a high-end baby stroller).

This kind of overspending is not good for kids or their parents--because, unless you're in the top income bracket, the only way to give your children everything they want (or everything marketers tell you they should have) is to neglect your own retirement saving. And the message you're sending, meanwhile, is that money grows on trees. Or at least on Mommy and Daddy.

"Spending too much" is a value judgment, of course, not a specific number. On average, couples with two kids and a household income in the middle range ($43,200 to $72,600) spend $7,493 a year on each child, from birth to age 17, according to the U.S. Department of Agriculture. (The per-child total rises to $11,234 if you count their share of the cost of maintaining your home, such as insurance, mortgage interest, and utilities.) While those aren't princess-party budgets, spending much more than the averages may be overdoing it--and can even lead to credit card debt and other money troubles. A recent study by Robert Manning, Ph.D., professor of consumer finance at RIT in Rochester, NY, found that parents use credit more freely when buying for their children than when shopping for themselves.

Another way to define "too much" is to ask yourself this: If you're in your 30s, are you putting at least 10 percent of your income into a retirement plan? If you're in your 40s or 50s, are you saving 15 percent? If you're nowhere close to those goals, you may be spending too much on your family lifestyle, and your child-related costs are a good place to consider cutting back.

What Your Kids Can Do

One way to control spending is, surprisingly, to give your child more financial responsibility, says Janet Bodnar, author of Money Smart Women. Starting at 6 or so, kids should have allowances and use them to pay for certain expenses. For example, 8-year-olds might finance their own trading cards, snacks, or hair ornaments. By 12, they can pay for their DVD rentals and iTunes purchases. (Have them scour stores and the Web for the lowest prices and show you their research.) By 16, they should have a fixed clothing allowance--that way, if they want $100 jeans, they'll see that the only way to buy them is to cut back on everything else. When they're older, part-time jobs should help cover their cell phone bills and gasoline. Giving your kids limits takes the pressure off you.

How large a weekly allowance should you give each child? That depends. If you'd like your son to budget for his own video games, he'll need a bigger allowance than if you're paying for them yourself. But this point is crucial: Don't ride to the rescue if the money runs out. If you set up clear house rules and stick to them, your kids will learn to make the choices they need for a secure, happy financial future of their own.

How You Can Cut Back

Be skimpy with baby and toddler purchases. Buy as little as possible because kids this age outgrow things so fast. If you've never shopped for your children on eBay, try it now, advise Steve and Annette Economides, authors of the money-saving handbook America's Cheapest Family. You'll find good and lightly used toys and books at low prices. (Before buying used baby furniture, check the U.S. Consumer Product Safety Commission Website -- cpsc.gov -- to ensure that the item wasn't recalled for safety reasons.) Also check out local parenting Web sites (such as urbanbaby.com) for inexpensive equipment, clothes, and toys that other parents are looking to unload. And don't forget garage sales.

Scale down birthday parties. Forget what the neighbors do. You convey your values to your children by doing what you think is right, not by exhausting yourself with a party that breaks your budget. At the end of each backyard birthday for one of my sons, I filled water buckets, passed out squirt guns, and let the kids give one another (and me!) a soaking. It was always the party of the year. To chat with supportive parents, go to birthdayswithoutpressure.com.

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Pay for less entertainment. Do you buy premium cable channels for your kids but not for yourself? Do you cram their schedules with lessons that require special equipment? With teens, do you pay to enroll them in summer programs instead of encouraging them to get jobs? Each of these individual decisions might make sense, but collectively they can put you over budget.

Control cell phone costs. Kids clamor for phones, to download music, e-mail pictures, and text message their friends. If this is the way their group keeps in touch, it's an expense you'll probably have to swallow. But costs can easily skyrocket, so choose a prepaid service with limited minutes. Or tell the kids that you'll pay for basic service only -- they'll have to spend their own money for overage charges, text messages, and ring tones. They'll get frugal, fast.

Brace yourself for some whining. It can be hard to say no to kids -- and if you try it, they may unleash their most fearsome weapons: guilt trips, grumbling, etc. Stand your ground. They may whine for a while, but they won't love you any less. In the long run, your children will learn valuable lessons in money management -- and you'll be closer to a safe, financially secure retirement.

Is Your Spending Normal?

Source: 2005 USDA report, Expenditures on Children by Families

Find this article at: http://www.goodhousekeeping.com/kids-spending-0707