5 Signs You’re Spending Too Much Money on Your Kids
Raising a child has never been more expensive. Middle-income parents will spend $245,340 to raise a kid born in 2013, according to the latest figures from the United States Department of Agriculture, nearly a 2% increase from 2012. Worse, that figure includes the cost of food, housing, education, and childcare from birth until age 18, but not the cost of college.
With an annual price tag of $12,800 to $14,970, a child’s expenses make up a significant chunk of many family’s budgets. And many parents are spending much more – private school tuition alone costs an average of $9,582 a year. Of course, no one wants to shortchange their offspring, and there’s a case to be made for big expenditures like private school or expensive hobbies. But when does doing all you can for your children cross the line into excess?
Parents with a perpetually open wallet may come to regret their carefree spending. Kids pick up on their parents’ spending habits, and a failure to distinguish between wants and needs now means your kid won’t learn the money management skills she needs to thrive as an adult. Spoiled children used to having their whims catered to can grow into entitled adults. When the real world rears its ugly head, they won’t be prepared for disappointment.
“When you hand your child everything, they grow up with the misconception that they can and should be given things for the rest of their lives — perfect scores, the most expensive car, a management position as their first job,” Loni Coombs, the author of “You’re Perfect…” and Other Lies Parents Tell: The Ugly Truth About Spoiling Your Kids, told SheKnows. “This sense of self-entitlement sets your child up for a lifetime of disappointment and confusion. Instead, teach your children to be self-sufficient.”
Moms and dads who can’t stop spending money on their kids also do themselves a financial disservice. If you’re blowing your budget to pay for extras for your children, you could be setting yourself up for a money disaster in terms of high debt or lowered retirement savings.
Worried that splurging on your kids is getting out of control? Here are five signs you’re spending money you don’t have on Junior.
1. Your kid’s room looks like Toys R Us
Parents will spend an average of $6,500 on toys over a child’s lifetime, according to data from the Toy Industry Association. If you’re guilty of showering your child with all the latest and greatest gadgets and games, consider cutting back, especially if you’re among the 29% of parents surveyed by T. Rowe Price who admit to spending money on toys to bribe their kids.
While buying fewer toys is the most obvious way to save, you can still ensure your child is entertained without going broke. Gently used toys can be found for a fraction of the price of new ones on eBay and at garage sales. Shopping sales, visiting discount retailers like Marshall’s, using coupons, and even organizing toy swaps with families you know are other ways to save. And don’t forget generous friends and family: Grandma and grandpa may be so excited to buy presents for your little one that you never need to visit a toy store yourself.
2. You always throw over-the-top birthday parties
Forget pin-the-tail-on-the-donkey and a homemade cake. Kids’ birthday parties have gotten much more extravagant in recent years. In the U.K., parents are spending 320 pounds – about $400 – on birthday bashes for their kids, not including gifts. That’s hundreds of dollars you could be putting toward college or retirement, rather than spending money a party that will be forgotten in a few hours.
While parents might feel pressure to organize an over-the-top celebration to keep up with other kids (and their parents), there are ways to host a memorable event without breaking the bank. Shopping for party décor on clearance, keeping an eye out for Groupon deals, and hitting the dollar store for party essentials are good ways to save, according to Ashley Eneriz at MoneyNing.
3. Your food budget is out of control
Food accounts for 16% of parents’ average spending on their kids, and it’s one of the easiest areas to go overboard. “Food is among the top three expenses in raising children,” Angela Tagtow, the executive director of the USDA’s Center for Nutrition Policy and Promotion, said in a statement. “Parents have the challenge of providing food that is not only healthful and delicious, but also affordable.”
Frequent trips to the drive-thru, expensive brand-name snacks, and other costly convenience foods can really do a number on your finances. Spending money on food that ultimately ends up in the trash is another sign your grocery budget needs a second look. (The typical American household tosses $640 worth of food in the garbage every year, according to the American Chemistry Council.) While kids will always need to be fed, there are plenty of ways to trim expenses in this area, from shopping sales to starting a garden to making your own frozen meals.
4. Your kid has an expensive hobby, and they hate it
Raising a budding gymnast, ballerina, or football player is expensive. The average parent forks over $739 every year for after-school activities for their kid. If your child has a passion for their hobby, then the extra cost is likely worth it. But if your kid is signed up for every activity under the sun and isn’t enthusiastic about all of them, it may be time to simplify their schedule and start spending money on something else.
Knowing when to give up on an activity is a tough call – no one wants to raise a quitter, after all. But there’s no sense in wasting money on an extracurricular that makes both you and your kid miserable, even if it will look great on their college application.
“If the child doesn’t have motivation and you’re the one driving it all the time, that’s a sign that it might not be the right activity at that time,” Ann Dolin, president of the tutoring and test prep company Educational Connections, told Today.
5. Your kid has a full-time job – and you’re still spending money on their bills
Everyone knows that many of today’s young adults have had a rough go of it. Tuition cost are up, student loan debt is rising, and good-paying jobs can be hard to find. Though some parents are saying their grown kids are on their own when it comes to college and other expenses, others end up spending money on their child’s bills as they try to find their feet. Nearly half of millennials have received financial support from their parents since leaving the nest, a 2016 Fidelity survey found, including help with cell phone bills, utilities, and groceries. Those expenses can total between $1,000 and $5,000 every year, according to a Money survey.
While helping out your kids financially is admirable, it shouldn’t go on forever, especially if he is able to cover his own expenses. Not only are you keeping your kids from developing financial independence, but the constant outflows are a financial drain that could put your future at risk. Telling your kid you’re going to cut them off is hard but letting them know they’re spending their future inheritance on phone bills and groceries may be enough for them to cut the cord themselves.
“Let them know there is no trust fund,” Ted Beck, CEO of then National Endowment for Financial Education, told Money. “You are making real tradeoffs to support them. That usually accelerates the time frame.”