The Cost of Kids

“I just ask my parents for money, and once I get it,
I go and spend it on something,” she says.

In fact, almost everything Emily owns – the car, her
clothes and even her makeup – was paid for by her parents.

“Yeah, it’s just sort of all handed to me; I
don’t really have to work for it I guess,” she
says.

How much have the Segrests spent on their daughter? Emily’s
mother says she’s never done the math, but the U.S.
Department of Agriculture has.

The average middle-income family spends more than $10,000
a year on a teen – a total of $173,000 per child before
college!

“It’s scary,” says Deborah Segrest, Emily’s
mother. “It would scare me, I think, to think about
all the money that we spend on them.”

But experts say the problem isn’t how much parents
spend on their children but that spending
is often the only thing the child sees.

“What kids grow up with is watching their parents put
things on credit cards, watching their parents take money
out of the ATM. But how often does the child or teenager look
at the parent putting money into the bank? Paying off those
bills?” says William Buchanan, a psychologist.

That’s one reason why one in five college students
today has more than $6,000 in credit card debt. These teens
have not learned how manage a budget or how much it costs
to live.

“If people wait until their child is a teenager before
they start teaching them about money … they’re
about five years too late,” Buchanan says.

Emily is just now beginning to think about her financial
future.

“I’m a little concerned about how I’ll
be able to handle it. Like once I get a real job, if I’ll
have enough money or not,” she says.

A new study from the
U.S. Department of Agriculture shows just how expensive raising
a child can be in the 21st century. For their study, researchers
used data from the U.S. Department of Labor’s Consumer
Expenditure Survey, conducted from 1990-1992, and updated
to 2002 dollars with the Consumer Price Index. Recording childhood
expenditures for housing, food, transportation, clothing,
health care, child care/education and miscellaneous up until
age 18, they logged the following totals for raising a child:

Income up to $39,700
Dual-parent family: $127,080
Single-parent family: $120,720

Income of $39,700 to $66,900
Dual-parent family: $173,880

Income of $66,900 and up
Dual-parent family: $254,400

Although kids are expensive, you can take
several steps to shave off a few bucks here and there to make
a difference in your budget. The experts at Parents’
Source offer the following tips for stretching your budget:

• Cut and trade coupons. By
  clipping just $10 worth of coupons a week on products you
  typically buy, you save $520.00 a year.
• Buy and sell used items.
  Yard sales, flea markets and consignment shops are great
  places to get those “dream toys” for your child
  for a fraction of the retail cost.
• Get the most out of your computer.
  Print greeting cards, use online encyclopedias and magazines,
  download maps and games, comparative shop and communicate
  regularly with out-of-state family for free.
• Invest your time in your child
  and save money. Often, saving money requires spending
  time, and what better solution for family money management
  than planning to spend productive time with your child?
  Kids love spending time with moms and dads gardening, cooking,
  sewing and crafting. Not only can you save money on groceries
  and clothes, but you can also enjoy quality time with your
  child, which is the best investment of all!
• Save on entertainment. Museums,
  schools, community groups and recreation departments offer
  quality family activities at little or no cost. The public
  library is another great resource, offering best-selling
  books, videotapes, online computers and monthly programs
  at most locations.
• Make the most of your bargains.
  Try to keep a little extra cash in your wallet for when
  you discover a real bargain, then buy in bulk and stock
  up on items you know you will need in the future.
• Use credit cards wisely.
  Many people see credit cards as being evil, but if you use
  them wisely, you don’t need to throw your credit cards
  away. Save on finance charges by paying off outstanding
  balances, then look for a program that can earn money for
  you. Some credit cards offer cash back or incentive programs
  – be sure to read the terms carefully. For example,
  the Toys R Us Visa offers a 1% rebate in the form of store
  gift certificates.
• Start saving early for college.
  One of the biggest challenges of raising children on a shoestring
  budget is saving for college. If one of the money-saving
  ideas above nets you some extra cash this year, you can
  invest that now for college and earn significant interest.
  Scheduling time with a financial planner to set financial
  goals and a plan for achieving them can also be well worth
  the time and money.

It is important to understand that your child learns much
of his or her money management skills by watching how you
manage money at home. You can help your child or teen learn
the value of money by following these strategies from the
Institute of Consumer Financial Education:

• As soon as your child can count, introduce him or her
  to money. Take an active role because repetition and observing
  others are the two methods by which he or she learns.
• Communicate with your child, as he or she grows, about
  your values concerning money and how to save it, make it
  grow and most importantly, how to spend it wisely.
• Help your child learn the difference between needs, wants
  and wishes. This will prepare him or her for making good
  spending decisions in the future.
• Indoctrinate your child to accumulation (or savings) instead
  of spending (or consumption). Explain and demonstrate the
  concept of earning interest income on savings. Consider
  paying interest on money saved at home. Have your child
  help calculate the interest so he or she can learn and see
  how fast money accumulates through the magic power of compound
  interest.
• When giving your child an allowance or income, give the
  money in denominations that encourages saving. For example,
  if the amount is $5, give out five $1 bills and encourage
  at least one be set aside in savings.
• Take your child with you to the store, explaining how
  to plan purchases in advance and make unit price comparisons
  and also checking for value, quality, reparability, warranty,
  etc. Spending money can be fun and very productive when
  spending is planned.
• Allow your child to make spending decisions, both good
  and poor, and then encourage a discussion of pros and cons
  before more spending takes place. Encourage him or her to
  employ common sense when buying. That means research before
  making major purchases, waiting for the right time to buy
  and employing the spending-by-choice technique, which is
  selecting at least three other items money could be spent
  on, once it has been decided to make a purchase.
• Show your child how to evaluate ads on television, radio
  and in print. Will the product really perform and do what
  the commercials say? Is it really a sale price? Do alternative
  products exist that will do a better job, perhaps for less
  cost? Just because something looks expensive doesn’t
  mean it represents the best value. Remind your child that
  if something sounds too good to be true, it usually is.
• Be cautious about making credit cards available to your
  older child, even when he or she is entering college. Credit
  cards have a message: “SPEND!” Some students
  report using the cards for cash advances and also to meet
  everyday needs instead of an emergency (as originally planned).
  Many students in that group also report having to cut back
  on classes to fit in a part-time job just to pay for their
  credit card purchases.

Institute
of Consumer Financial Education
Parents’
Source
U.S. Department of Agriculture