Overspending on Kids Risks Financial Future

[gravity]

by Aleksandra Todorova
Monday, June 11, 2007
provided by Smartmoney.com

Stretching a $30,000 income isn't easy for Brittiany Dillon and her husband. Each month, gas and grocery bills alone eat up their disposable cash.

But when it comes to their two-year-old daughter, the young parents — she is 21 and he is 23 — simply can't say no. "You want your child to have this idyllic childhood and not say 'My mommy never did this for me,'" says Dillon, a stay-at-home mom.

For both her first and second birthday, the couple threw their daughter a birthday bash that set them back at least $600. Christmas gifts, planned to not exceed $50, somehow hit at least $300. That may not seem like a lot of money, but it's a fortune for the Dillons, who last year moved back in with family so they could make payments on their $30,000 credit-card debt, accumulated after a failed business start-up. (They have since paid the credit-card balances down to $13,000 and rented an apartment on their own.) "We've done a lot of things we know we can't afford," Dillon says. "It's an emotional thing."

...

Living beyond one's means — so the kids can have the best — is a common picture in the wealthy suburbs, Boyle says. It's also a particularly common scenario with divorced couples. Mothers often insist on keeping the house — even if they can't afford it — because they don't want to "uproot" their children. "I can't tell you how many women tell me, 'I don't want to move to another school district, I've got to keep the kids steady.' And they don't realize that with no income, they may not be able to refinance if they need money down the line."

To be sure, such mistakes are so often rooted in family values that it's difficult, if not impossible, to override. And that's OK, as long as parents understand the trade-offs, says Elaine Scoggins, a CFP in Seattle.

Telling parents that they need to pay themselves first, or else risk ending up penniless in retirement, Scoggins has found, often does the trick. "When they realize how they could affect their own independence and elder years, they become more motivated to cut back in other areas," she says.

More: http://finance.yahoo.com/banking-budgeting/article/103103/Overspending-on-Kids-Risks-Financial-Future

[Warpy]

1. I know they love their daughter, but jaysis, people, get a grip!

Kids under two don't know what the hell a birthday is, or what Xmas is, and Santa scares the shit out of them. A simple first birthday party for the parents, grandparents and a few friends for the picture of the kid smearing birthday cake in her hair is sufficient.

In fact, you can generally have cheap birthdays and Xmases for kids until they start school and the other parents look down their long blue noses at you. Then it's time for the one big present and a lot of clothes.

Let's hope living with Mom and Dad while paying down the plastic taught them SOMETHING, like get rid of the plastic.

[IndyOp]

2. The toys are for the parents, so they can keep up with the Joneses...

Most kids like the boxes better...

[Iris]

8. I just don't get why people can't see that "things" are not as important for children

as a loving, stable home. And, in many case, the things are not so important to the kids until the parents make them important.

[gravity]

11. Part of the problem is all the commercials targeted towards kids

There are too many things that kids want since it looks cool on TV, but they get bored of it in a day once their parents buy it for them.

[Iris]

13. Right. But in our current culture, it's a parents responsibility to teach a kid how to sort through

all that crap. It's still possible to teach a kid how to work towards and save for things. In fact, I'd go beyond that and say it's ESSENTIAL in today's world that children be taught this.

[NorthernSpy]

3. why can't putting away savings be a demonstration of love?

I never got designer clothes or extravant gifts as a kid, and it didn't make me angry with my parents. Why are so many parents so insecure about whether their kids will love them?

Those European social democracies that we all admire? They have high rates of personal savings, and low rates of consumer debt. I like that. That's the sensible way to live. And I think that children would value that, too, because it would give them a feeling of security.

[Sen. Walter Sobchak]

6. the best thing my parents ever gave me was a debt free university education,

and they started saving for it about five minutes after the pee test,

[Iris]

14. yep, me, too! But mine was paid for through overtime on a (union) production line. n/t

[BlooInBloo]

4. I don't think anybody could have anticipated that.

[Sen. Walter Sobchak]

5. I saw alot of this when I worked on bankruptcies,

Atleast these people were spending it on their kids, most of the sub-30 financial basket cases I saw were still paying for their sophmore year clubbing!

[Deja Q]

7. Wake me when MASTERCARD airs a commercial telling people to live within their means.

(Which will be, um, NEVER...)

Our society also encourages debt. And guess who runs society? Not the parents. And contrary to popular belief, neither do Christians. Most corporate executives would have Jesus hung (a gallows is cheaper than a big cross plus the cost of nails and brass plaque... and a tree will do it for even less.)

[InkAddict]

9. Parents can still wind up penniless

even if they pay themselves first. All it takes is some serial outsourcing/merging/downsizing of the families income source during peak earning years and elderly caretaking support of parents who had a grew up in depression, got a WWII entitlement but didn't bother to invest in advabced education or Wall Street.

[Matsubara]

15. Definitely - and this family WILL end up penniless.

Unless they stay with the parents forever, or find a way to drastically increase their income, they will never be able to sock away anything. No way to save while raising 2 kids on a $30K income anymore.

[InkAddict]

10. Parents can still wind up penniless

even if they pay themselves first. All it takes is some serial outsourcing/merging/downsizing of the families income source during peak earning years and elderly caretaking support of parents who had a grew up in depression, got a WWII entitlement but didn't bother to invest in advabced education or Wall Street.

[taught_me_patience]

12. If I even had the audacity to ask for an ipod

when I was younger, my mom would have laughed me out of the house. Birthday presents didn't exceed $100 for a long time (80's), even though my mom is well off and owns her own business. Children these days don't know the value of money.